CBK cuts lending rate to 7pc in bid to cushion economy from virus fallout

By , K24 Digital
On Thu, 30 Apr, 2020 10:41 | < 1 min read
Patrick Njoroge
Central Bank of Kenya Governor Patrick Njoroge. PHOTO/File

The Central Bank of Kenya cut its benchmark interest rate for the fourth time in a row at a special meeting of the monetary policy committee to try to cushion the economy from the fallout of the coronavirus pandemic.

The MPC reduced the rate to seven per cent from 7.25 per cent, governor Patrick Njoroge said in an emailed statement on Wednesday, April 29.

That brings the total easing since November to 200 basis points, with the rate now being the lowest since September 2011.

The median estimate of five economists in a Bloomberg survey was for a 50 basis-point cut.

Growth forecast CBK cut its 2020 growth forecast to 2.3 per cent.

This follows an economic expansion of 5.4 per cent in 2019 which missed government estimates.

The World Bank said output could shrink one per cent if the disruptions caused by the pandemic last for about three months.

The policy actions taken in March, when the MPC cut interest rates and lowered its cash-reserve ratio to free up liquidity, “are having the intended impact on the economy, and are still being transmitted,” Njoroge said.

The virus has disrupted agriculture and tourism, which are Kenya’s biggest foreign-exchange earners after remittances.

The latest information shows that orders have started to return, reflecting the impact of mitigation measures put in place by the government targeted at maintaining cargo flights, the lifting of lockdown measures and easing of supply restrictions in some of the key destination markets, CBK said.