The CBK has set its next monetary policy meeting for March 19, at a time its key rate-setting committee has signalled it has seen room for an accommodative monetary policy.
The Monday meeting comes against the backdrop of sustained sentiment by experts that Kenya’s decision to peg the interest rate cap to its base lending rate has eroded the decision-making capacity at the CBK.
The Central Bank of Kenya (CBK) is next week widely tipped to leave its policy rate unchanged, even as banks continue rationing credit.
The CBK has set its next monetary policy meeting for March 19, at a time its key rate-setting committee has signalled it has seen room for an accommodative monetary policy.
At its last meeting on January 22, the Monetary Policy Committee (MPC), which meets every two months, retained the benchmark lending rate at 10 per cent, maintaining a 17-month neutral policy stance.
This saw the maximum cost of loans remain unchanged.
The Monday meeting comes against the backdrop of sustained sentiment by experts that Kenya’s decision to peg the interest rate cap to its base lending rate has eroded the decision-making capacity at the CBK.
Experts say rate caps have eroded MPC’s ability to set rates. As such any response would upset current rate ceiling.
But the Kenyan government has promised the International Monetary Fund (IMF) a repeal of the interest rate capping law, leaving consumers under a cloud of uncertainty over the future cost of loans.
The IMF said last week in a statement released after a three-week visit to Nairobi that Kenya has committed to reforming the law, and to cut the fiscal deficit in order to secure a six-month extension of the Sh150 billion ($1.5 billion) standby facility that was set for expiry on Tuesday.
Analysts polled by the Business Daily expect the MPC to hold the rate, just like it did in January 22 meeting, at 10 per cent.
“I do not think that the committee will tamper with the present rate,” said independent analyst John Kirimi.
“The effects of the prolonged electioneering are still with us, famine signals are all over for us to see and the budget deficit is growing as a result of over borrowing by Government. All this cannot, in my view, allow the committee to review the rate.”
Stephanie Kimani, a research economist at Commercial Bank of Africa (CBA) concurre, forecasting the rate will remain unchanged.
“I expect that the MPC will hold the CBR at 10 per cent at the upcoming Monday meeting. However, the policy body may continue to imply scope for further easing,” said Ms Kimani.
The MPC voted to hold its benchmark lending rate at 10 per cent, saying inflation was expected to drop further.
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