It is a great relief for millions of borrowers in Kenya after the Central Bank of Kenya cuts the benchmark lending rate

CBK governor Patrick Njoroge said the decision was informed by the need to boost economic activity in the country.

  • The Monetary Policy Committee (MPC) fixed the benchmark rate at nine per cent from 9.5 per cent, meaning banks are now required to charge borrowers a maximum of 13 per cent interest on loans.
  • The MPC said its decision was informed by the need to boost economic activity in the country.

The Monetary Policy Committee (MPC) fixed the benchmark rate at nine per cent from 9.5 per cent, meaning banks are now required to charge borrowers a maximum of 13 per cent interest on loans.

The MPC said its decision was informed by the need to boost economic activity in the country.

“Consequently, while noting the risk of perverse outcomes, the committee decided to lower the Central Bank Rate (CBR) to 9 per cent from 9.50 percent,” said CBK governor Patrick Njoroge, who chairs the MPC in a statement Monday.

Dr Njoroge added that a relatively stable forex market, a narrower current account deficit, and a build-up of forex reserves that cushion the economy from unforeseen shocks informed the decision to cut the base rate.

“The MPC noted that inflation expectations were well anchored within the target range, and that economic growth prospects were improving,” he said.

This is the second time that the banking sector regulator has cut the signal rate since legal caps were introduced on the cost of credit nearly two years ago.

The treasury is pushing for the scrapping of the controls after more than two years of negative growth, despite MPs threat to scuttle the bid.

The country recorded economic growth of 5.7 per cent in the first quarter of this year, compared to 4.8 per cent in the first quarter of 2017.

Furthermore, economic output was below its potential level, and there was some room for further accommodative monetary policy.

Dr Njoroge said the regulator’s survey showed there is increased optimism on growth prospects, but added that the economic output was “below its potential level.”

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