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CBK piles pressure on banks to lower lending rates

“In line with the framework, the CBK has revised the KBRR to 8.90 percent from 9.87 percent, effective from July 25, 2016,” CBK said on Monday after its Monetary Policy Committee (MPC) meeting/FILE

“In line with the framework, the CBK has revised the KBRR to 8.90 percent from 9.87 percent, effective from July 25, 2016,” CBK said on Monday after its Monetary Policy Committee (MPC) meeting/FILE

NAIROBI, Kenya, Jul 25 – The Central Bank of Kenya (CBK) has now put pressure on banks to lower interest rates after reducing the Kenya Banks Reference Rate (KBRR) to 8.90 percent from 9.87 percent, effective July 25.

KBRR which was first introduced in July 2014 was to form a uniform base lending rate across the banking sector to enable consumers compare the pricing of loan products.

“In line with the framework, the CBK has revised the KBRR to 8.90 percent from 9.87 percent, effective from July 25, 2016,” CBK said on Monday after its Monetary Policy Committee (MPC) meeting.

However according to Mwambo Malamba from Commercial Bank of Africa’s (CBA) Treasury Department, the dilemma remains whether the banks will actually bow to the move and bring down the cost of loans to their customers.

“Today’s move by Central Bank is a clear indication that banks should bring their interest rates down for their customers. However as you know like in the past, it is one thing to reduce KBRR but it is another thing to see reduce lending rates,” Malamba told Capital FM Business.

KBRR came in after banks remained adamant to bring down lending rates even after Central Bank lending rates continued to drop.

In the meantime, CBK has decided to retain the Central Bank Rare (CBR) at 10.5 percent “in order to anchor inflation expectations, and to maintain market stability.”

The bank says despite the expected rise in cost of commodities due to tax on fuel, the inflation will remain within the government expectations hence no need to change the CBR rate.

“The CBK will continue to monitor developments in the domestic and international economies, and will use the instruments at its disposal to maintain overall price and financial sector stability.”

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