The central bank Monetary Policy Committee (MPC) has retained the base lending rate at 7% in its sitting Thursday.
MPC has attributed the decision to retain the Central Bank Rate(CBR) in its fifth consecutive sitting to the package of policy measures implemented since March, which it says were having desired outcomes on the economy.
“The MPC will continue to closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary. The Committee will meet again in January 2021, but remains ready to re-convene earlier if necessary,” said Dr. Patrick Njoroge, CBK Governor.
CBK expects the rate retention to continue driving credit flow to aid recovery in key sectors in the second half of the year after the real GDP contracted by an estimated 0.4% in the first half of 2020 due to COVID-19 containment measures.
“Growth in private sector credit stood at 7.7% in the 12 months to October. This is supported by recovery in demand with the improved economic activity following the easing of COVID-19 containment measures, and accommodative monetary policy,” Dr. Njoroge added.
Manufacturing sector recorded a 7.8% growth in loan uptake, transport and communications at 21.1%, real estate 7.6%, and consumer durables at 15.7%.
However by the end of October, loans amounting to Kshs. 1.38 trillion had been restructured equivalent to 46.5% total loan book of KES 2.97 trillion as banks initiated measures to cushion borrowers from coronavirus effects.
The benchmark rate was lowered from 7.25% in March when the first case of COVID-19 was reported to 7% in April.