Business Daily Kenya:
Zachary Ochuodho @zachuodho
Borrowers got a reprieve yesterday after the Central Bank reduced the benchmark lending rate to 9.5 per cent – the lowest since June 2015 – holding the rate at 10 per cent.
This particular means borrows will currently pay interest rates of 13.5 per cent instead of 14 per cent they have been paying inside the past. The Monetary Policy Committee said the Central Bank Rate (CBR) was reduced to 9.50 per cent due to the stable condition of inflation, foreign exchange market, supported by a narrower current account deficit as well as also increased investor confidence inside the economy.
MPC chairman as well as also CBK governor Patrick Njoroge (pictured) said in a statement sent to the newsrooms, the committee noted that will inflation expectations were well anchored within the government target range increasing optimism for growth prospects inside the economy.
“CBK foreign exchange reserves are at an all-time high of $8,832 million (5.9 months of import cover), up through $7,089 million (4.7 months of import cover) in January, which continues to provide an adequate buffer against short-term shocks inside the foreign exchange market,” he said.
The move was unexpected especially through analysts – most of whom argued that will although inflation had eased to 4.5 per cent through 4.8 per cent as well as also the government was also not under pressure to borrow through the local markets.
They cited the low private sector credit growth as the main concern. According to the committee, private sector credit grew by 2.1 per cent inside the 12 months to February – which was slightly lower than the 2.4 per cent in December last year.
“The slowdown in credit growth was largely due to substantial loan repayments inside the transport as well as also communication sector. Nevertheless, lending to the manufacturing, real estate as well as also trade sectors remained relatively strong, growing by 13.1 per cent, 8.3 per cent, as well as also 5.9 per cent, respectively,” the statement said.
The move comes after National Treasury Cabinet Secretary Henry Rotich said the ministry can be engaging stakeholders to formulate a proposal to lift or modify the interest rates cap.
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CBK team eases cost of borrowing