The Central Bank of Kenya (CBK) Monetary Policy Committee (MPC) has retained the Central Bank Rate (CBR) at 10.0 per cent.
This rate is expected to anchor on inflation expectations as the country faces severe drought and uncertainties in the global markets.
The MPC also suspended Kenya Bankers Reference Rate (KBRR) in the wake of the new law capping of interest rates.
The committee which has retained the rate at this level since August 2016, said it will continue to closely monitor uncertainties in the domestic and global economies – ready to tackle them if they arise
CBK in a statement said the MPC’s decision to retain CBR at 10 per cent was based on stable inflation and expectation.
This, it said would remain within target due to improved current account deficit – estimated at 5.5 per cent in 2016, confidence existing forex reserves and IMF credit facility that is adequate to manage forex volatility and table-banking industry.
Overall market liquidity tightened in January with net liquidity injection standing at Sh12 billion against Sh24.2 billion in December last year.
Analysts say with CBR remaining unchanged and CBK’s need to manage forex volatility will see current low market liquidity spare the market from aggressive tightening through open market operations.
“Over the next two months, we expect majority of the economic measures (used by MPC to set CBR) to remain stable.
“Based on this expectation, we do not see any immediate threat of banking spreads being squeezed by the lowering of CBR,” noted Standard Investment Bank in its daily report.
--mygov.go.ke