CBK lowers loan rate for the first time in 14 months

By Jimmy Mbogoh On Tue, 26 Nov, 2019 09:38 | < 1 min read
Patrick Njoroge
Central Bank of Kenya Governor Patrick Njoroge. PHOTO | FILE

The Central Bank Monetary Policy Committee has revised downward the benchmark lending rate to 8.5 percent from the previous 9 percent.

This comes barely a month after the interest rate capping law was repealed allowing commercial banks to lend at their own discretion.

According to the CBK, the move has been informed by the ongoing tightening of fiscal policy and conclusion that there was room for accommodating monetary policy to support economic activity.

The CBR rate, which has been at 9 percent for the last 14 months, has been guiding interest on commercial loans, which were limited at 4 percent above the apex bank’s rate.

Further, the committee noted that month-on-month inflation remained within target range in September and October, largely due to relatively stable food prices and lower cost of energy.

Sources in the banking sector, however, said that the reduction of the CBR rate is merely an academic exercise since the rate has no effect on lending.

What remains to be seen is whether banks will hold or will they also bring down their rate.