Kenya’s Central Bank lowers lending base rate for the first time in 15 months to 8.5% to entice local banks to offer cheap loans

The Central Bank of Kenya (CBK)
  • The Monetary Policy Committee (MPC) has lowered the CBK lending rate to 8.5% from 9% 
  • CBK hope local banks will take the clue and lower their lending rates accordingly.
  • In November, President Uhuru Kenyatta directed the parliament to scrap the capping of interest rates at 4% of the Central Bank of Kenya Base Rate.

The Central Bank of Kenya (CBK) has come out and offered its strongest signal yet to promote money circulation in the country.

On Monday, the Monetary Policy Committee (MPC) met to review the outcome of its previous policy decision and recent economic development. At the end of it, MPC noted that the ongoing tightening of fiscal policy and resulted in the economy operating below its potential and concluded there was room for accommodative monetary policy to support economic activity.

To entice local banks to offer cheap loans they lowered the CBK lending rate to 8.5% from 9% for the first time in 15 months.

In September this year, MPC met and decided to retain CBK’s lending rate at 9.0% for the eighth time in a row in the face of global uncertainties.

CBK governor, Patrick Njoroge at the time noted that inflation expectations were also within the target range in an “economy operating close to its potential.

In November, President Uhuru Kenyatta directed the parliament to scrap the capping of interest rate at 4% of the Central Bank of Kenya Base Rate, which was blamed for stifling economic growth, paving the way for commercial banks to now be at liberty to charge the rates as they please following the repeal of Section 33 (b) which set the caps.

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