- Kenya’s Central Bank has cut its lending rate to seven percent to boost lending to the private sector.
The cut by the Monetary Policy Committee (MPC) has set the benchmark rate of 75 basis points to 7 percent, and is the fifth cut since December when it was 9 percent.
A statement from MPC said the committee has decided to cut the rate to boost credit availability, given that the upside risk to inflation is low and that credit risk is declining rapidly.
The MPC Chairman Prof Njuguna Ndung’u who is also the CBK Governor said the market has been responding to these signals as indicated by the growth of loans to the private sector.
“Both banks and the real sector understood the Committee’s earlier decisions and credit to the private sector was once more picking up,” he said.
Reports said Kenya's inflation rate slumped to 6.6 percent in October from 17.8 percent in September after the statistics body adopted a new calculation method.
The introduction of a new methodology for calculating inflation which indicated that October inflation reduced by one percent point to 6.6 percent has also been hailed as a true reflection of the current cost of living.
“The efficiency of liquidity management by the banking sector is being enhanced through the horizontal repo uptake,” the Governor added, also stating that the economy has started showing signs of recovery as indicated by the improvement in tea and coffee prices which has aided rural recovery.
Analysts have also said the economy is riding over the global economic crisis and moving to a recovery path, further stating that the treasury’s stimulus package is similarly creating employment and augmenting spending power throughout the country.
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