NAIROBI, Kenya, Mar 19 – Kenyans will now borrow at lower interest rates after the Central Bank of Kenya (CBK) lowered banks’ lending rate to 9.5 per cent from 10 per cent.
The move will see Kenyans borrowing at an interest of 13.5 per cent from 14 per cent.
This is the first time the Monetary Policy Committee (MPC) has changed the rates in 18 months.
The MPC says the move is aimed at uplifting the economic output that is below potential levels.
“The MPC noted that inflation expectations were well anchored with governments target range and increased optimism for growth prospects in the economy,” CBK Governor Patrick Njoroge said.
Month-on-month overall inflation fell to 4.5 per cent in February 2018 from 4.8 per cent in January 2018 while CBK foreign exchange reserves are at an all-time high of USD8,832 million (5.9 months of import cover), up from USD7,089 million (4.7 months of import cover) in January 2018.
Private sector credit grew by 2.1 per cent in the 12 months to February 2018, slightly lower than the 2.4 per cent in December 2017 attributed substantial loan repayments in the transport and communication sector.
“Nevertheless, lending to the manufacturing, real estate, and trade sectors remained relatively strong, growing by 13.1 per cent, 8.3 per cent, and 5.9 per cent, respectively,” Njoroge said in a statement.
He says the MPC will closely monitor the impact of this change in its policy stance.
“Other developments in the domestic and global economy will also be observed, and the MPC stands ready to take additional measures as necessary,” he said.
This comes even as the push to scrap the interest rates capping continues to grow with analysts expecting it to be reviewed this year.