Kenya: CBK Retains Base Lending Rate At 8.75% On Easing of Inflation

Nairobi — The Central Bank of Kenya (CBK) has retained its lending base rate at 8.75 percent on easing inflationary pressure that saw the cost of goods and services rise.

On Monday, CBK’s Monetary Policy Committee (MPC) said that it retained the rate since the existing monetary policy proved effective in containing spiraling price rises.

MPC in November last year increased its base rate to 8.75 percent from 8.25 per cent in the preceding month to tame runaway inflation that had risen to 9.5 percent from 9.1 percent in October.

“The Committee noted that the impact of the further tightening of monetary policy in November 2022 to anchor inflationary pressures was still transmitting in the economy,” MPC Chairman Patrick Njoroge said in a statement.

“The MPC concluded that the current monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 8.75 percent,” Njoroge added.

Easing of inflation came at a time when prices of edible oils and wheat products declined on the recovery of the global supply chain.

It was also boosted by fuel inflation, which fell to 12.7 percent in December 2022, from a high of 13.8 percent in the previous month due to lower international oil prices.

“The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary,” the Governor said.

“The Committee will meet again in March 2023, but remains ready to re-convene earlier if necessary.”

The MPC also indicates that private sector credit increased to 12.5 percent in 2022, compared to 8.6 percent in 2021.

Strong credit growth was observed in the manufacturing (13.8 percent), transport and communication (23.5 percent), trade (11.4 percent), business services (13.7 percent), and consumer durables (12.9 percent).

“Based on available economic indicators, GDP is estimated to have grown by 5.6 percent in 2022,” MPC indicated.

“The economy is expected to remain resilient in 2023, supported by continued strong performance of the services sector and expected recovery in agriculture, despite the global uncertainties.”