Central Bank retains benchmark lending rate at 10pc

Written By: Judith Akolo
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CBK

The Monetary Policy Committee has retained the benchmark interest rate at 10 percent keeping it at the same level for 16 months.

The central bank policymakers say their decision was informed by muted inflationary pressures, stable foreign exchange market and increased credit to the private sector.

The MPC cited muted inflationary pressures that was expected to further drop.

Year on year rate of inflation has slowed from a high of 9.2 percent in June to the current 5.72 percent, its lowest level in 17 months, helped by lower food prices after good rains boosted harvests.

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This is despite an increase in fuel prices, which the central bank expects to be muted by lower food prices.

CBK says the foreign exchange market has remained stable, supported by strong diaspora remittances, tea and horticultural exports as well as tourism recovery.

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Despite the current account deficit widening by 10 basis points to 6.5 percent of GDP, it is expected to narrow to 6.2 percent of GDP next month as a result of a slowdown in SGR-related imports.

The Central Bank also notes that credit to the private sector grew 2 percent in the 12 months to October compared to 1.7 percent in the 12 months to September.

This means private sector credit growth has maintained the upward trend for the second month in a row.

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The Central Bank cited uncertainties over U.S. economic policies and the post-Brexit resolution as among global risks for Kenya.

Based on muted inflationary pressures, a stable shilling, private sector credit growth and a resilient banking sector, policymakers of the Central Bank have retained the benchmark lending rate at 10 percent keeping it at the same level for 16 months.

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