NAIROBI, Kenya, Jan 27 – Central Bank of Kenya has spared borrowers higher cost of loans after its Monetary Policy Committee cut its benchmark loan rate to 8.25 percent.
The committee, which was holding its first meeting for the year, said it cut the rate in an environment where inflation expectations were within the target range and an economy operating below its potential.
The cut was a follow-up on November 2019’s decision to reduce CBR to 8.50 percent. It had been previously left at 9.0 percent for seven times in a row.
“The Committee assessed that the effects of the lowering of the CBR in November 2019 continued to be transmitted in the economy, but also noted that there was room for further accommodative monetary policy to support economic activity,” MPC’s Chair Governor Patrick Njoroge said in a statement.
Overall the committee expects the inflation to remain within the target range in the near term due to lower prices of fast-growing food items following the continuing rains, and lower electricity prices.
At the same time, growth in private sector credit particularly to Micro, Small and Medium-sized Enterprises (MSMEs) is expected to increase gradually due to the deployment of innovative MSME credit products, the repeal of interest rate caps and the continued easing of credit risk.
Going forward, the committee expects stronger growth of the economy supported by, among others, the recovery of the agricultural sector due to the recent interventions by the Government, stronger growth of MSMEs, robust private sector credit growth, continued implementation of the Big 4 agenda and a stable macroeconomic environment.
“The MPC will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary,” said the statement.