Borrowers sigh with relief as CBK halts rate increases
Central Bank of Kenya retained the policy lending rate at 18 per cent in its monthly meeting yesterday, signalling a gradual shift in its monetary policy prompted by stabilising inflation and exchange rate.
On Wednesday, the regulator noted that the decision to hold interest rates was in recognition of the ease in inflation from a year-high of 19.72 per cent in November to 18.93 per cent last month, while the shilling has strengthened to about 87 units to the dollar from October’s record low of 107 units.
“The committee considered it necessary to maintain its current tight monetary policy stance to provide time for the impact of the adjustments in the Central Bank Rate to have their full impact together with the liquidity management instruments in place,” said the MPC in a statement.
The rapid increase in interest rates has eliminated cheap credit and cooled off demand for imports, effectively bolstering the shilling and slowing down inflation.
Most analysts had expected CBK to hold the policy rate steady, voicing their agreement with the MPC that the tight liquidity should be upheld to sufficiently tame inflation and shore up the shilling.
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