CBK cuts base lending rate to 9.5pc to spur growth
Kenyans can now access loans at lower interest rates after the Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) lowered the base lending rate for the first time in 18 months.
In the latest review, the MPC cut the base lending rate by 50 basis points to 9.5 percent down from 10 percent.
This will now see the maximum interest rate charged by banks come down to 13.5 percent from 14 percent in line with the interest rate cap law.
According to the law, banks cannot charge more than four percent of the central bank rate.
In a statement to newsrooms, CBK governor Patrick Njoroge who chairs the MPC said there was need to ease monetary policy to spark economic growth.
“Therefore, it concluded that there was scope for easing its monetary policy stance in order to support economic activity. Consequently, while noting the risk of perverse outcomes, the Committee decided to reduce the Central Bank Rate (CBR) to 9.50 percent from 10.00 percent,” Dr Njoroge said.
The central bank rate was last adjusted in September 2016, the same month the interest rate cap law came into effect.
In making the decision, the committee noted that inflation continued to drop while the foreign exchange market remained stable.
The CBK C Private Sector Market Perception Survey conducted in March indicated those in the private sector expect stronger growth in 2018.
Dr Njoroge said private sector credit had slowed to 2.1 percent as of February down from 2.4 percent in December.
Banks has been operating with tighter risk management tools that have seen a number of borrowers locked out of the formal credit market.
Kenya has been under pressure to scrap the interest rate cap law with the National Treasury and the CBK in agreement that the law had become unsustainable.
The International Monetary Fund (IMF) last week pegged the six month extension of Kenya’s Sh150 billion standby loan agreement on commitment from the government to do away with law.
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