CBK leaves the benchmark rate unchanged at 7% for the fifth time

The Central Bank of Kenya (CBK) has left the benchmark lending rate unchanged at seven percent for the fifth straight time following its policy meeting on Thursday.

The reserve bank’s notes the seven percent Central Bank Rate (CBR) adjusted last in April this year remains accommodative of economic recovery as the country emerges from the COVID-19 pandemic.

“The Committee noted that the package of policy measures implemented since March were having the intended effect on the economy, and are being augmented by implementation of the announced fiscal measures in the FY2020/21 Budget. The Monetary Policy Committee (MPC) concluded that the current accommodative monetary policy stance remains appropriate, and therefore decided to retain the CBR,” CBK stated.

The CBK says leading economic indicators (LEI) point to a continued recovery of the economy in the second half of the year from the disruptions witnessed in the second quarter which saw GDP contract by 0.4 per cent in the first half.

“The November 2020 MPC Private Sector Market Perception Survey revealed improved expectations of economic activity in the next two months, and improved optimism on economic prospects for the next twelve months. Respondents attributed the improvement to continued normalization of economic conditions with the lifting of COVID-19 restrictions, strong agricultural production, and Government focus on infrastructural projects,” added the CBK.

Kenyan exports have for instance grown by 2.8 per cent 10 months to October against disruptions occasioned by the pandemic even as services sector receipts remain subdued by weakness in international travel.

Growth in private sector credit across 12 months to October has remained resilient at 7.7 per cent from 7.6 in September with strong lending being witnessed in the sectors of manufacturing, transport & communications and real estate.

The MPC expects the economic stimulus program announced by government earlier in the year to stimulate the observed economic rebound.

Nevertheless, the CBK policy committee is expected to closely monitor new developments and make the rightful adjustments if deemed necessary.

CBK’s MPC will meet again at the end of January 2021.