Kenya's central bank reduces lending rate by 100 basis points

Kenya’s central bank has lowered its benchmark lending rate by 100 basis points to 10.5 per cent citing a fall in the country’s overall inflation.

During a meeting chaired by the Central Bank of Kenya (CBK) Governor Patrick Njoroge, the bank’s monetary policy committee (MPC) lowered its key lending rate after holding rates since last August.

“The Committee noted that overall inflation is expected to decline and remain within the Government target range in the short-term. Therefore, it concluded that there was policy space for an easing of monetary policy while continuing to anchor inflation expectations,” the bank noted in a “statement.

The country’s month on month inflation fell to 5.3 per cent in April from 6.5 per cent recorded the previous month. This decline is within the government’s target range of 2.5 per cent to 7.5 per cent.

Nevertheless, CBK said it will continue to monitor key macroeconomic aggregates and developments in the economy that will be used as instruments to maintain overall price and financial sector stability.

Furthermore, the committee noted that the performance of the economy remains strong. Kenya’s economy grew by 5.6 percent last year from 5.3 percent in the previous year.

“The MPC Market Perception Survey conducted in May 2016, shows that the private sector remains optimistic supported by macroeconomic stability, stronger agriculture performance, public infrastructure investment, and tourism recovery,” the bank said.