The Central Bank of Kenya (CBK) has retained the country’s base lending rate at 8.75 percent, defying expectations by analysts that it would be raised further to tame inflation.
The Monetary Policy Committee (MPC) on Monday retained the Central Bank Rate (CBR) with the regulator’s top-most monetary policy organ projecting inflationary pressures will ease due to the State’s move to allow duty-free imports on maize, sugar and rice.
The MPC further said the decision was informed by expectation that the impact of the raise of the rate during the last review in November is still yet to be fully felt in the economy, thus lessening the need to raise it again.
“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. Additionally, the MPC noted that this action will be complemented by the recently announced government measures to allow limited duty-free imports on specific food items which are expected to moderate prices and further ease domestic inflationary pressures,” said CBK Governor Patrick Njoroge.
The government has waived import duty on maize and rice for a period of six months starting Wednesday to ease shortage of the cereals to avert a food crisis.
The Ministry of Agriculture announced that traders will be allowed to import up to 900,000 tonnes of duty-free white maize and 600,000 of duty-free milled rice from February 1 to August 6 to boost food supply in the country.
The CBK’s stance comes at a time inflation has started to ease following its rise to a five-year high of 9.59 per cent in October last year.
Inflation eased to 9.5 per cent in November and further to 9.1 per cent in December driven by a decline in maize, milk, edible oils and wheat prices. Fuel inflation also dropped to 12.7 per cent in December from 13.8 per cent in November due to lower global crude oil prices.
“The MPC concluded that the current monetary policy stance remains appropriate and therefore decided to retain the CBR at 8.75 per cent,” said Mr Njoroge.
The constant base lending rate is a boost to borrowers following the earlier projections of the rate being increased meaning borrowers will be saved form a further increase in the cost of loans.
Following the raise of the CBR in November, some banks increased their lending rates leading to costlier loans for borrowers.
