CBK retains CBR at 10pc, suspends use of KBRR

The Central Bank of Kenya (CBK) has retained the benchmark lending rate at 10 percent following Monday’s Monetary Policy Committee meeting.

The decision comes as the banking regulator remains confident the shilling is under no immediate threat despite weakening against the dollar.

The MPC decision also took into account inflationary pressure, with CBK governor Dr Patrick Njoroge adding the bank would continue monitoring effects of the ongoing drought.

By retaining the central bank rate (CBR) at 10 percent, the maximum interest rate chargeable on a loan facility will remain at 14 percent.

President Uhuru Kenyatta last year signed a law ushering Kenya into an interest rate control regime.

Last week the International Monetary Fund (IMF) called for a review of the law, arguing it could choke economic growth.

Dr Njoroge however said the banking sector showed no signs of slowing down with relative access to credit.

“The committee observed that available data was inconclusive for assessing the impact of the recent capping of interest rates,” Dr Njoroge said.

The central bank noted the improved current account from a deficit which stands at 5.5 percent was helped by lower import bills for petroleum products, machinery and transport equipment.

The CBK has at the same time suspended the use of the Kenya Bankers Reference Rate (KBRR) in pricing of loans following the enactment of the rate capping law.

There was confusion last year, as commercial banks interpreted the law differently with some banks initially choosing to price loans based on the KBRR.

The CBK later cleared the air adding that interest rate decisions would apply for a year.

The KBRR was initially designed as a base for banks to price their loans to customers before the new law came into effect in September 2016.