Central Bank of Kenya's (CBK) top decision making organ on Thursday expectedly retained its base lending rate at 10 per cent, citing lower inflationary pressure.
The Monetary Policy Committee (MPC) said the cost of living index, which dropped to 5.72 per cent in October from 7.1 per cent a month earlier, was expected to continue falling in the short-term period.
“The MPC continues to monitor the impact of the interest rate caps on the effective transmission of monetary policy,” CBK governor Patrick Njoroge, who chairs the MPC, said in a statement Thursday.
“The CBK will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary.”
The decision was in line with analysts who had been polled by the Business Daily ahead of the meeting that is usually held every two months.
“Essentially the rate caps have created material interference in the monetary transmission mechanism,” Aly-Khan Satchu, Nairobi-based analyst and CEO of Rich Management said on Tuesday.
“Therefore, any rate cut – which in a normal monetary ecosystem is now due because of the sharp slide in inflation and an economy which is at a standstill – would be muddied,” he added.