Central Bank retains benchmark lending rate at 10pc

Central Bank of Kenya (CBK) Governor Patrick Njoroge. PHOTO/FILE
Central Bank of Kenya (CBK) Governor Patrick Njoroge. PHOTO/FILE 

The Central Bank of Kenya has retained the benchmark lending rate at 10 per cent amid a marginal rise in inflation and a relatively stable forex market.

CBK noted that the inflation rate, which increased to 6.5 per cent in October from 6.3 per cent the previous month was within the government target range.

In a statement, CBK Governor Patrick Njoroge said the foreign exchange market had been "relatively stable despite the volatility in the global financial markets following the US elections and the seasonal increase in demand for foreign exchange by corporates to finance dividend payments."

Dr Njoroge pointed out that banking liquidity had stabilised since August adding that the continued interest by foreign banks to enter the foreign market indicated confidence in the banking market.

Inadequate data

The retention of the key lending rate means that bank's maximum lending rate remains at 14 per cent and minimum deposit rate at 7 per cent.

Dr Njoroge noted that there has not been adequate data for a conclusive analysis of the impact of the introduction of interest rate caps on banks’ lending and deposit rates.

"The CBK will continue to closely monitor developments in this respect," he said.

The MPC, however, observed that private sector credit growth had stabilised in October.

"The slower growth witnessed over the last several months was found to be largely an outcome of structural factors in the banking sector rather than monetary policy. There is no evidence that this is having a negative impact on economic growth," MPC noted.