, NAIROBI, Kenya, Jul 10 – The Central Bank of Kenya’s Monetary Policy Committee (MPC) has retained the base lending rate at 8.5 percent.
The MPC says inflation remained within the medium target set by the government while the exchange rate was stable.
Overall, month-on-month inflation increased from 4.05 percent in May 2013 to 4.9 percent in June 2013 reflecting an increase in food prices coupled with the impact of the base effect attributed to the decline in the consumer price index in mid 2012.
The committee also noted that the government’s domestic borrowing target of Sh106.47 billion for 2013/2014 was significantly below Sh165.7 billion for the 2012/2013 year.
“The borrowing coupled with the planned issuance of a sovereign bond during the fiscal year should ensure that domestic borrowing does not exert pressure on government securities,” the committee noted.
Commercial banks have continued to announce reductions in their base lending rates.
The committee noted that number of loan applications increased by 36 percent from 65,113 in April 2013 to 88,973 in May 2013.
The economy registered a strong growth of 5.2 percent in the first quarter of 2013 and confidence in the economy has been sustained.
This, according to the committee, reflects the current macroeconomic stability characterized by low and stable inflation rates and a strong performance of the agriculture which grew at 8.3 percent compared with 2.1 percent in the first quarter of 2012.
However risks to the macro-economic outlook emanated from high current account deficit and the current instability in the Middle East and North Africa.