The Central Bank of Kenya (CBK) has kept its lending rate unchanged at 8.75pc in a move expected to continue strengthening the credit market and keep inflation in check.
In its meeting on Wednesday, the CBK Monetary Policy Committee said the holding of the Central Bank Rate (CBR) remains appropriate to keep inflation rate within range of 2.5pc-7.5pc and stabilize the exchange rate.
The committee noted that headline inflation stood at 4.4pc last month compared to 4.3pc in February though warned of risks associated with global energy prices as a result of tension in the Middle East.
“Despite expected upward pressure from higher energy prices, overall inflation is expected to remain within the target range in the near term, supported by appropriate monetary policy actions, expected stability in food prices attributed to favourable weather conditions, and a broadly stable exchange rate,” said CBK.
During the meeting, MPC said the banking sector remains resilient backed by strong liquidity and capital adequacy ratios.
While there was an improvement in credit to private sector which improved to 8.1pc in March from 7.4pc in February, there was notable increase in Non-Performing Loans (NPL).
The ration of NPLs to gross loans rose to 15.6pc last month from 15.4pc in December mainly attributed to increase of NPL in personal and household, trade, agriculture and manufacturing sectors.
“Growth in credit to key sectors of the economy, particularly building and construction, trade, agriculture and consumer durable remained strong, reflecting improved demand for credit in line with the declining lending rates,” added MPC.
Average lending rates by banks was recorded at 14.7pc in March down from 14.8pc in February signaling effects of earlier reduction in the benchmark rate.
