Kenya retains benchmark lending rate

by Elayne Wangalwa 0

The committee maintained its interest rate at 8.5 per cent noting that Kenya’s overall inflation had declined in the months of September and October 2014 and remained within the government target of 7.5 per cent.

The country’s month on month inflation rate fell for the second consecutive session and stood at 6.43 per cent.

During its bi-monthly meeting the committee also cited that a stable currency was a driver in keeping the benchmark interest rate unchanged.

“The exchange rate remains stable despite short-term pressures arising from external events in the Eurozone and the United Kingdom that has resulted in a “flight to safety” and the strengthening of the US Dollar. Resilient foreign exchange inflows through diaspora remittances and sustained foreign investor participation in the Nairobi Securities Exchange (NSE) continued to support the Kenya Shilling,” said the Central Bank of Kenya.

The Central Bank of Kenya said they will continue to monitor key macroeconomic aggregates and any emergent risks from the external and domestic economies that may impact on price stability in order to continue to anchor inflationary expectations.

In an interview with CNBC Africa Paul Mwai, CEO of AIB Capital said, “The expectation was for the rates to remain the same all the pointers are favourable, inflation is declining, the exchange rate is stable, interest rates are stable, and we are seeing some growths in the economy, not as good as expected. So I think, the expectations were that it would remain at 8.5 per cent.”

Nonetheless, Mwai believes that the benchmark lending rate will come down in the coming months.

“I think with the outlook on inflation, there is an expectation of a further drop going forward on the back of reduced power and oil prices , there is a real expectation that the rates would go down. So my expectation is that it should have dropped by a small amount to perhaps give it a little direction to the market because it has stayed stable for a long time,” Mwai said.