Inside Politics

CBK holds lending rate at 7pc, cites effects of recent policy measures

Thursday, January 28th, 2021 00:00 |
Central Bank Governor Patrick Njoroge. Photo/PD/File

Central Bank of Kenya (CBK) has held its benchmark lending rate at seven per cent for the sixth straight time, saying the recent policy measures were having the intended effect on the economy.

In a statement issued yesterday, the regulator’s Monetary Policy Committee (MPC) organ noted that recent measures implemented since March 2020 at the onset of the Covid-19 pandemic continue to trickle in the economy augmented by implementation of fiscal measures.

“The MPC concluded that the current accommodative monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 7.00 per cent,” CBK Governor Patrick Njoroge said.

Closely monitor

He said MPC will continue to closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, with a view to taking additional necessary measures if called upon.

“The Committee will meet again in March 2021, but remains ready to re-convene earlier if necessary,” Njoroge said.

On Tuesday, analysts predicted retention of CBR at 7 per cent, basing their projection on the negative output gap in the economy as a justification for a further accommodative monetary policy stance.

“The cautious approach towards lending to the private segment implies downside risks accompanying a further rate cut.

We thus view that the policymakers will maintain the CBR at 7.00 per cent,” said Churchill Ogutu, head of research at Genghis Capital.

He said there is bound to be upward inflationary pressure that will be caused by substantial increases in the cost of important goods as opposed to demand-driven inflation, further cementing their view for a neutral monetary policy stance.

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