The bank’s Monitory Policy Committee (MPC) on Tuesday noted that the overall monthly inflation rates remained within the government medium-term target of 5 percent in March and April 2013/FILE
The bank’s Monitory Policy Committee (MPC) on Tuesday noted that the overall monthly inflation rates remained within the government medium-term target of 5 percent in March and April 2013.
Inflation rates stood at 4.14 percent in April 2013 compared to 4.11 percent in March 2013 due to low inflation supported by stability in both the exchange rate and declining international oil prices.
The exchange rate averaged Sh85.82 against the US dollar in March 2013 compared with Sh84.19 in April.
This partly reflected the increasing confidence in the foreign exchange market following the peaceful elections in March 2013 coupled with the build-up of foreign exchange reserves.
During the period, the CBK increased its usable foreign exchange reserves from Sh424.3billion ($5.05billion) in March 2013 to Sh482.9 billion ($5.75billion) in April 2013.
The disbursement of Sh9.1billion ($1.08billion) by the International Monetary Fund (IMF) in April coupled with commercial banks’ selling foreign exchange to the CBK, also contributed to the build-up of the reserves.
Despite the continued signal sent by CBK to the commercial banks to lower their lending rates, borrowers are still paying high interest rates for their loans of up to 17percent.
The banks have defended themselves saying the drop may not be as quick as expected due to what they term as high cost of funding.
“Short-term interest rate movements were coordinated by the Central Bank Rate while Open Market Operations ensured that they remained stable. However commercial banks average lending rates continued their slow downward trend,” CBK Governor and chairman of the MPC Njuguna Ndung’u said in a statement.
However the CBK says private sector credit growth during the first quarter of 2013 reached the traditional sectors of the economy.
Looking ahead, the main threats to the macroeconomic outlook is the persistent strain in the eurozone coupled with the balance of payment pressures attributed to the high current account deficit, currently estimated at 11.4 percent of Gross Domestic Product (GDP).
“Nevertheless, the latest growth projections for Kenya’s main trading partners in the region remain strong, endorsing a stable outlook for the exchange rate with expectations for increased foreign exchange inflows from regional trade, ” Njuguna said.
