Central Bank retains CBR at 10% amid uncertainty over global economy
The Central Bank of Kenya’s monetary policy committee (MPC) has retained the benchmark lending rate at 10 percent.
In making its decision, the committee noted the mild inflationary pressure did not have a severe effect on the economy rising to 6.5 percent in October.
CBK governor Dr Patrick Njoroge said the economy continued to show signs of stability but added more data would need to be gathered on how decisions in the United States and Europe would affect the local economy.
“Global growth prospects remain fragile on account of uncertainties in part due to the impact of Brexit and political developments in the US. Uncertainty relating to the tightening of the US monetary policy and its implications for global capital flows remain a concern,” Dr Njoroge said.
The regulator however remains buoyed by sustained growth, with the economy growing by 6.2 percent in the second quarter.
By retaining the central bank rate at 10 percent, banks will charge a maximum of 14 percent interest on loans and seven percent on deposits.
President Uhuru Kenyatta passed the Bank Amendment Act in August with banks having to adjust their lending patterns in line with the new law.
Dr Njoroge said it was still early days to gauge the effectiveness of the interest cap.
“The committee noted that the available data were inadequate to facilitate a conclusive analysis to closely monitor developments in this respect,” he said.
The National Treasury has raised concern over the slowing private sector lending which in the year to September dropped to 4.8 percent.
According to the Central Bank, the slower growth is attributable to structural ‘factors’ in the banking sector, adding it was not influenced by monetary policy.
Dr Njoroge added there was no evidence to indicate that the slowing uptake of credit by the private sector was having a negative impact on the economy.