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Kenya

CBK cuts lending rates to 8.5pc to spur economic activity

The CBK Headquarters on Haille Sellasie Avenue in Nairobi. /CFM-FILE.

NAIROBI, Kenya, Nov 26 – The Central bank of Kenya has cut the benchmark lending rate by 50 basis points to 8.5 percent, saying the move is expected to spur economic activity in the country.

The Monetary Policy Committee had held the rate at 9.0 percent for seven consecutive times since end of July 2018 before Monday’s cut.

“The Committee noted the ongoing tightening of fiscal policy and concluded there was room for accommodative monetary policy to support economic activity,” a statement from CBK said.

This comes a few weeks after the removal of the lending rates cap, which CBK said had led to significant rationing of credit, particularly to the most vulnerable.

The inflation rate stood at 4.9 percent in October compared to 3.8 percent in September, which the statistics office said was reflecting temporary effects of increases in the prices of maize grain and sifted flour.

At the same time, private sector credit grew by 6.6 percent in the 12 months to October, compared to 7.0 percent in September.

According to CBK, strong growth in credit to the private sector was observed in trade (8.5 percent); finance and insurance (15.1 percent); consumer durables (28.6 percent); and private households (6.9 percent).

Growth in private sector credit particularly to Micro, Small and Medium-sized Enterprises (MSMEs) is expected to increase due to the deployment of innovative credit products targeting the sector, and the repeal of interest rate caps.

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