Relief for borrowers as CBK lowers interest rate to 13%

Relief for borrowers as CBK lowers interest rate to 13%

- in Business, News

Kenyans will now access loans at cheaper rates after Central Bank’s Monetary Policy Committee lowered the lending rate by 50 basis points to 9 per cent from 9.50 per cent.

This means the maximum interest rate banks will charge on loans drops to 13 per cent from the previous 13.5 per cent set in March in line with the interest rate cap law.

Normally, banks are not allowed by law to charge more than 4 per cent interest above Central Banks lending rate.

“The MPC noted that inflation expectations were well anchored within the target range, and that economic growth prospects were improving,” CBK Governor Patrick Njoroge said on Monday.

“Furthermore, economic output was below its potential level, and there was some room for further accommodative monetary policy,” Njoroge, who also chairs the MPC added.

The CBK boss, however, noted that CBK’s decision to lower the CBR to 9.50 percent in March had little impact on key macroeconomic variables such as credit and economic growth.

The effect of this saw the credit growth in the Private sector in the month of April grow by only 2.8 per cent compared to 4.3 per cent growth overt a 12 month period ending June 2018.

Credit to the manufacturing, building and construction, and trade sectors grew by 12.3 per cent, 13.5 per cent, and 8.6 per cent, respectively, Njoroge said.

“The MPC will closely monitor the impact of this change in its policy stance. Other developments in the domestic and global economy will also be observed, and the MPC stands ready to take additional measures as necessary.”

Njoroge noted that overall inflation is expected to remain within target due to lower food prices even as high fuel prices and excise duty on some goods is expected to exert inflationary pressure in the near term.

The CBK boss said the inflation rate in June stood at 4.3 per cent compared to 4.0 per cent in May due to the recent increase in energy prices.

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