CBK key lending rate unchanged

The Central Bank of Kenya (CBK) has left its key lending rate at seven per cent for the ninth straight time after its policy decision meeting on Wednesday.

The hold in the Central Bank Rate (CBR) mirrors the continuation of an accommodating policy stance by CBK’s Monetary Policy Committee (MPC) as the economy continues to re-emerge from ravages of the COVID-19 pandemic.

The CBK has cited a relatively strong economic recovery in the first half of 2021 from available leading economic indicators while it expects inflation to hold within the 2.5 to 7.5 per cent target band on muted demand.

The MPC’s survey of the private sector, chief executive officers and hotels has also revealed general optimism on growth prospects this year on the roll out of vaccinations by government and easing COVID-19 containment measures.

Kenya’s exports in the first half of 2021 have grown by 11.1 per cent from last year with receipts from horticulture and manufacturing seeing the biggest jump.

Meanwhile, the banking sector remains resilient with the percentage of loan defaults falling to a flat 14 per cent at the end of June.

At the same time, private sector credit growth has rebounded having increased to 7.7 per cent in June from a lower 6.8 per cent in April.

The MPC has backed reforms to the CBK policy setting role, contained in a new white paper out this week to enhance the effectiveness of monetary policy and support the anchoring of inflation expectations.

The hold in the benchmark lending rate is largely in line with broad market expectations which preceded Wednesday’s MPC meeting.