Analysts expect base lending rate to remain at 10% (Kenya)

By Brian Ngugi | Business Daily, Kenya September 15, 2017

The Central Bank of Kenya (CBK) advisory committee is likely to retain the base lending rate unchanged at 10 per cent when it meets on Monday, analysts have projected.

The meeting is being held on the backdrop of sentiments by the CBK governor this week giving the clearest signal that the regulator intends to push for a repeal of the year-old law capping interest rates because of the negative effect it has had on the economy.

CBK governor Patrick Njoroge, speaking on Wednesday, however, warned that commercial banks would have to show discipline in the pricing of loans so as not to overcharge borrowers.

Analysts forecast the rate to remain steady as the shilling shows signs of resilience, with the country’s foreign reserves rising gradually.

This is even as inflation stubbornly remains above the preferred range of five per cent plus or minus 2.5 percentage points, and growth of credit to the private sector at its lowest level in over a decade.

“The economic indicators remained unchanged since the last MPC meeting in July. With inflation having eased to 8.04 per cent from 9.2 per cent since the last meeting and the currency having appreciated by one per cent over the same period of time, we believe that the MPC should adopt a wait and see approach,” said Cytonn in a research note ahead of Monday’s meeting.

In the previous meeting held on July 17, the maximum cost of loans remained unchanged providing relief for millions of borrowers.

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