The maximum cost of loans remains unchanged after the Central Bank of Kenya (CBK) Monday retained the base lending rate for the eighth time in a row.
The Monetary Policy Committee (MPC) maintained the benchmark rate at 10 per cent, saying the current monetary policy stance had reduced the threat of money-driven inflation.
MPC chairman and CBK governor Patrick Njoroge cited a relatively stable forex market, a narrower current account deficit and exchange reserves that continue to cushion the economy from unforeseen shocks in holding the base rate.
“The committee noted that there was some room for accommodative monetary policy in the near term, as well as the risk of perverse outcomes. It concluded that there was need to further monitor and assess the impact of its policy actions,” said Dr Njoroge in a statement.
He said private sector credit grew by 2.4 per cent in the 12 months to December 2017, slightly higher than the 2 per cent in October 2017.
“Analysis of this increase showed strong credit growth to manufacturing, domestic trade, and real estate sectors, which grew by 13 per cent, 10.5 per cent, and 8.6 per cent, respectively,” he said.
The meeting on Monday came against the backdrop of sustained sentiment by experts that Kenya’s decision to peg interest rate cap on its base lending rate has eroded the CBK’s decision-making capacity.