By Nicholas Nduati
Economists project that the Central Bank of Kenya (CBK) is likely to retain the base lending rate at 10 percent when the Monetary Policy Committee (MPC) meets this afternoon.
According to analysts at Cytonn Investments, CBK will do this in order to support economic growth, in light of a slowdown in first quarter GDP growth at 4.7 percent up from 5.9 percent in a corresponding quarter of last year.
Analysts also feel that a drop in the rate of inflation to 9.21 percent has vindicated CBK that has previously argued inflation was predominantly driven by food prices.
Being the last MPC meeting to be held ahead of the General Election, it comes against the backdrop of sentiments by experts that Kenya’s decision to put a cap on interest rates has eroded the decision making of the CBK.
Analysts believe in hiking the CBR in order to curb the increasing liquidity, may lead to further inflationary pressures.
The Cytonn analysts also note that based on the current trend in private sector credit growth which is now at an eight-year low coupled by a slowdown in gross domestic product growth, the MPC will be pressed to retain the rate to support growth.
Analysts also feel that the recent inflation print had vindicated the MPC, which has previously argued inflation was predominantly driven by food prices.
Kenya’s inflation fell to 9.21 per cent year-on-year in June, down from 11.7 percent a month earlier driven by a drop in food prices.