CBK keeps the benchmark lending rate at 7% for the sixth time

The Central Bank of Kenya (CBK) has left the benchmark lending rate at seven per cent at its sixth straight policy meeting on Wednesday.

In a statement following the conclusion of its Monetary Policy Committee (MPC) meeting, the reserve bank stated the package of policy measures effected in March 2020 were still effective in supporting the economy.

The CBK expects the raft of measures which included the lowering of the cash reserve ratio to 4.25 per cent to back up the economy as it shows signs of recovery.

“Leading indicators for the Kenyan economy point to a recovery particularly in the fourth quarter of 2020, from the disruptions earlier in the year. This recovery is supported largely by strong performance in the agriculture and construction sectors, resilient exports, and continued recovery in manufacturing and services,” the bank noted.

“Against this performance and the favourable global outlook, the economy is expected to rebound strongly in 2021, supported by recovery in the services sectors particularly education, manufacturing, resilient agriculture and the ongoing policy support through the Government’s economic recovery plan.”

CBK’s January 2021 MPC private sector markets perception survey has revealed optimism on economic prospects in the year following the resumption of activity in the majority of sectors.

“Respondents attributed the improvement largely to the reopening of all learning institutions, expectations of acquiring a vaccine, the implementation of the economic stimulus programme by the government, resumption of most businesses that had stalled due to the pandemic, and strong agricultural production,” the CBK added.

“However, uncertainties were noted with regard to the increase in COVID-19 infections globally and emergence of new variants.”

Private sector activity reached rose to 8.4 per cent in December from 8.2 per cent in November with manufacturing, transport and agriculture being the greatest beneficiaries of the new credit flows.

Further, the CBK noted inflation remains within expectations as it expects a modest impact of recently introduced tax measures to consumer spending.