CBK

CBK retains base lending rate at 7%

CBK retains base lending rate at 7%

In Summary

•CBK governor Patrick Njoroge noted inflationary pressures were rising

•He said overall inflation stood at 6.6 per cent in Agust 2021 compared to 6.5 per cent in July, largely due to increase in fuel and food prices.

CBK Governor Patrick Njoroge
CBK Governor Patrick Njoroge
Image: FILE

The Central Bank of Kenya has retained the base lending rate at seven per cent.

In a statement after its Monetary Policy Committee meeting on Tuesday, CBK governor Patrick Njoroge noted inflationary pressures were rising domestically and internationally.

He said overall inflation stood at 6.6 per cent in August 2021 compared to 6.5 per cent in July, largely due to increase in fuel and food prices.

During the same duration, food inflation increased to 10. per cent from 9.1 per cent while fuel inflation remained elevated at 9.2 percent du to the impact of the rise in international oil prices.

The governor said the global economy continues to strengthen in 2021 largely supported by the ongoing deployment of vaccines, relaxation of Covid-19 containment measures and travel restrictions as well as strong policy measures.

"However the pace of  recovery, the global economy remains uneven across countries, and is dependent on distribution of vaccines across regions and evaluation of the pandemic particularly following a resurgent of new variants," he said.

Many global institutions have called for review of the vaccine accessibility in African countries.

Meanwhile, Njoroge said despite increase in fuel and food prices, indicators for the economy point to a strong GDP recovery in 2021.

He said this is mainly supported by robust performance of construction, manufacturing, education, real estate and transport and storage sectors.

" The economy is expected to rebound in 2021, supported by the continued reopening of the services sectors, recovery in manufacturing and stronger global demand," he said.

The banking sector has remained strong and resilient with strong liquidity and capital adequacy.

Growth in private sector credit increased to seven per cent in August from 6.1 per cent. Another sector that has done well is the export of goods which has remained strong growing by 11.5 per cent in the period of January to August2021 compared to the same period in 2020.

The Committee concluded that the current accommodative monetary policy stance remain appropriate, and therefore decided to retain the Central Bank Rate at seven per cent.