Central Bank likely to retain benchmark lending rate, analysts predict

Tuesday, May 26th, 2020 00:00 |
Central Bank of Kenya. Photo/PD/File

Noel Wandera @NoelWandera

The Central Bank’s Monetary Policy Committee (MPC) meets tomorrow, with analysts predicting retention of the current seven per cent benchmark rate.

Analysts from Ghengis Capital have based their forecast on the current moderate inflation.

They also say the government is likely to adopt a wait-and-see attitude to monitor how CBK’s previous interventions are filtering into the economy.

“We expect a neutral policy stance in the MPC meeting,” said Churchil Ogutu, head of research at Ghengis Capital. 

“Inflation is still moderate and will not spike as there is no demand inflationary pressure at the moment,” he told Business Hub.

The country’s overall year on year inflation rate in April rose slightly to 5.62 per cent from the revised 5.51 per cent in March, Kenya Bureau of Statistics (KNBS) said in May. 

Private sector

Initially, inflation in March had dropped to 6.06 per cent, down from 6.37 per cent rate recorded in February.

Ogutu said private sector growth was at nine per cent in April, “not seen at this level since July 2015,”an assertion Albert Bwire, an economics lecturer at the United States International University-Africa (USIU-Africa), doubted due to unemployment and reduced man hours especially in the manufacturing sector due to the Covid-19 pandemic.

“If it is true, which I highly doubt then it means that the private sector can borrow for continuous growth because credit is affordable,” said Bwire.

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