Central Bank of Kenya Governor Patrick Njoroge. Photo/nation.co.keThe Central Bank of Kenya (CBK) has announced the retention of the base lending rate despite inflation hitting a five-year high. The Monetary Policy Committee (MPC) maintained the benchmark rate at 10 percent, saying the current monetary policy stance had reduced the threat of money-driven inflation.
The announcement implies the maximum cost of loans remains unchanged as banks continued to shy from lending due to the legal caps on borrowing although The Central Bank insists that as a result of the caps, the number of loan applications had increased by 23.4 per cent between August 2016 and April, reports the Nation.
MPC chairman who is also the CBK Governor Patrick Njoroge cited a stable forex market, a narrower current account deficit and exchange reserves are “at all-time high levels” which continue to cushion the economy from unforeseen shocks as the reasons for holding the base rate unchanged.
“The MPC, therefore, decided to retain the Central Bank Rate (CBR) at 10 per cent. The committee will continue to closely monitor developments in the domestic and global economies, and stands ready to take additional measures as necessary,” said Dr Njoroge in a statement.
The government capped lending rates last September at four percentage points above the Central Bank Rate, saying they were too high and banks had repeatedly failed to lower them.