CBK retains lending rate at 7pc to boost economic recovery
PANDEMIC: Central Bank of Kenya (CBK) retained the policy lending rate at 7 per cent to support economic recovery in the backdrop of the Covid-19 pandemic. The bank said the decision was arrived at based on the fact that inflation was within the target range and leading economic indicators continued to show strong recovery.
“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,” said the MPC in a press statement. CBK has kept the policy rate at 7 per cent since last year perhaps the longest time the benchmark rate has stayed unchanged.
Overall inflation declined to 6.5 per cent in October 2021 from 6.9 per cent in September, mainly due to lower fuel prices. The economy rebounded strongly in the first half of 2021, mainly reflecting the recovery in economic activity following the easing of Covid-19 restrictions.
In particular, real GDP grew by 10.1 per cent in the second quarter of 2021 compared to a contraction of 4.7 per cent in the second quarter of 2020.
This it said reflects the strong recovery of the services sector particularly in transport and storage, education, information and communication, wholesale and retail trade, and the improved performance of the construction and manufacturing sectors.
The previous surveys, for instance, the private sector market perceptions survey, CEOs survey, and the survey of hotels revealed the highest level of optimism about economic growth prospects since March 2021.
Respondents attributed this optimism to sustained recovery across different sectors, the lifting of the curfew, reduced Covid-19 infection numbers and increased vaccinations, continued government infrastructure spending, and the global economic recovery which is expected to boost export demand.
“Nonetheless, while concerns about the pandemic have eased, respondents remained concerned about the dry weather conditions and increased political activity,” the regulator said.– John Otini