Central Bank of Kenya Retains Benchmark Lending Rate at 9%

The Central Bank of Kenya (CBK) has retained the Central Bank Rate (CBR) at 9 percent attributing it to the inflation expectations remaining within the target range.
The Monetary Policy Committee (MPC) which met on Monday said that the current policy stance remains appropriate and that the committee will continue to monitor any perverse response to its decisions.
“The Committee, therefore, decided to retain the CBR at 9.00 percent,” said MPC in a statement.
Month-on-month overall inflation remained stable within the target range in November and December 2018, largely due to lower food prices following favorable weather conditions, reduction in electricity tariffs, the decline in fuel prices, and limited demand-driven inflationary pressures.
Overall inflation was 5.7 percent in December compared to 5.6 percent in November. Non-food-non-fuel (NFNF) inflation remained below 5 percent, indicating that demand pressures in the economy were muted.
Overall inflation is expected to decline in the near term, largely due to lower international oil prices, expectations of lower electricity prices following increased power generation from cheaper sources, and expected stability in food prices.
The foreign exchange market has remained stable supported by balanced flows, and a narrowing in the current account deficit to 5.1 percent in the 12 months to November 2018 compared to 6.5 percent in November 2017.
The narrowing reflects strong growth in diaspora remittances and tourism receipts, higher tea and horticultural exports, slower growth in imports due to lower food and SGR–related equipment imports and the decline in international oil prices.
The current account deficit is estimated at 5.2 percent of GDP in 2018 and is expected to narrow to 5.1 percent in 2019.
The CBK foreign exchange reserves, which currently stand at USD 8,131 million (5.3 months of import cover), continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.
Private sector credit grew by 2.4 percent in the 12 months to December 2018, compared to 3.0 percent in November, largely due to successful recovery efforts and loan repayments.
Strong growth in private sector credit was observed in the following sectors: finance and insurance (17.5 percent); consumer durables (11.0 percent); business services (8.0 percent); and private households (6.8 percent).
Private sector credit growth is expected to strengthen in 2019 relative to 2018, with the anticipated higher economic activity and easing credit risk.
The banking sector remains stable and resilient. Average commercial banks’ liquidity and capital adequacy ratios stood at 48.6 percent and 18.7 percent, respectively, in December 2018.
The ratio of gross non-performing loans (NPLs) to gross loans fell to 12.0 percent in December from 12.3 percent in October, largely due to declines in NPLs following sustained recovery efforts by banks particularly in the trade, manufacturing, building, and construction, and transport and communications sectors.
The economy picked up strongly in 2018, with data for the third quarter showing that real GDP growth accelerated to 6.0 percent in the first three quarters of 2018 from 4.7 percent in a similar period in 2017.
An assessment of available indicators of economic activity showed that strong growth continued into the fourth quarter of 2018. This improved performance reflected higher agricultural production, the continued recovery of the manufacturing sector, and the buoyant services sector, particularly trade, information and communication, accommodation and restaurants, transport and storage, and real estate.
Micro, Small and Medium-Scale Enterprises (MSMEs) remained resilient in 2018 and are expected to support growth in 2019, to the extent that their constraints, including access to finance, are alleviated. Growth is expected to remain strong in 2019, supported by agricultural production, a stable macroeconomic environment, and continued improvement in the business environment. Additionally, the alignment of Government spending to the Big 4 priority sectors is expected to boost economic activity in manufacturing, agriculture, construction and real estate, and health sectors.
The MPC Private Sector Market Perception Survey conducted in January 2019 indicated that inflation expectations were well anchored within the target range, with respondents revising their inflation expectations for the near term downwards on account of expected lower prices of food, fuel, and electricity.
The Survey also revealed increased optimism that economic growth would be stronger in 2019 due to, among other factors, a better investment climate, continued infrastructure development, and implementation of the Big 4 projects by the Government.
Expectations of increased agricultural production, the continuing decline in international oil prices, a stable macroeconomic environment and strong tourism performance also contributed to the strong positive sentiment.
Nevertheless, the optimism was tempered by the slow growth in private sector credit and concerns of a likely slowdown in global growth in 2019.
Global growth is expected to weaken in 2019, with increased uncertainties with regard to the trade tensions between the U.S. and China, Brexit negotiations, the slowdown of the Chinese economy, the partial shutdown of the U.S. government, and the pace of normalization of monetary policy in the advanced economies. These developments could lead to higher volatility in the global financial markets.
About Soko Directory Team
Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory
- January 2025 (119)
- February 2025 (120)
- January 2024 (238)
- February 2024 (227)
- March 2024 (190)
- April 2024 (133)
- May 2024 (157)
- June 2024 (145)
- July 2024 (136)
- August 2024 (154)
- September 2024 (212)
- October 2024 (255)
- November 2024 (196)
- December 2024 (143)
- January 2023 (182)
- February 2023 (203)
- March 2023 (322)
- April 2023 (298)
- May 2023 (268)
- June 2023 (214)
- July 2023 (212)
- August 2023 (257)
- September 2023 (237)
- October 2023 (264)
- November 2023 (286)
- December 2023 (177)
- January 2022 (293)
- February 2022 (329)
- March 2022 (358)
- April 2022 (292)
- May 2022 (271)
- June 2022 (232)
- July 2022 (278)
- August 2022 (253)
- September 2022 (246)
- October 2022 (196)
- November 2022 (232)
- December 2022 (167)
- January 2021 (182)
- February 2021 (227)
- March 2021 (325)
- April 2021 (259)
- May 2021 (285)
- June 2021 (272)
- July 2021 (277)
- August 2021 (232)
- September 2021 (271)
- October 2021 (304)
- November 2021 (364)
- December 2021 (249)
- January 2020 (272)
- February 2020 (310)
- March 2020 (390)
- April 2020 (321)
- May 2020 (335)
- June 2020 (327)
- July 2020 (333)
- August 2020 (276)
- September 2020 (214)
- October 2020 (233)
- November 2020 (242)
- December 2020 (187)
- January 2019 (251)
- February 2019 (215)
- March 2019 (283)
- April 2019 (254)
- May 2019 (269)
- June 2019 (249)
- July 2019 (335)
- August 2019 (293)
- September 2019 (306)
- October 2019 (313)
- November 2019 (362)
- December 2019 (318)
- January 2018 (291)
- February 2018 (213)
- March 2018 (275)
- April 2018 (223)
- May 2018 (235)
- June 2018 (176)
- July 2018 (256)
- August 2018 (247)
- September 2018 (255)
- October 2018 (282)
- November 2018 (282)
- December 2018 (184)
- January 2017 (183)
- February 2017 (194)
- March 2017 (207)
- April 2017 (104)
- May 2017 (169)
- June 2017 (205)
- July 2017 (189)
- August 2017 (195)
- September 2017 (186)
- October 2017 (235)
- November 2017 (253)
- December 2017 (266)
- January 2016 (164)
- February 2016 (165)
- March 2016 (189)
- April 2016 (143)
- May 2016 (245)
- June 2016 (182)
- July 2016 (271)
- August 2016 (247)
- September 2016 (233)
- October 2016 (191)
- November 2016 (243)
- December 2016 (153)
- January 2015 (1)
- February 2015 (4)
- March 2015 (164)
- April 2015 (107)
- May 2015 (116)
- June 2015 (119)
- July 2015 (145)
- August 2015 (157)
- September 2015 (186)
- October 2015 (169)
- November 2015 (173)
- December 2015 (205)
- March 2014 (2)
- March 2013 (10)
- June 2013 (1)
- March 2012 (7)
- April 2012 (15)
- May 2012 (1)
- July 2012 (1)
- August 2012 (4)
- October 2012 (2)
- November 2012 (2)
- December 2012 (1)