CBK retains anchor rate at 8.75pc

Tuesday, January 31st, 2023 08:40 | By
CBK retains anchor rate at 8.75pc
Central Bank of Kenya (CBK). PHOTO/Courtesy

The Monetary Policy Committee (MPC) has retained interest rates at 8.75 per cent, keeping the anchor rate unchanged for the first time since July, amid easing inflation pressures in Kenya.

Had the Central Bank of Kenya (CBK) policy organ changed the anchor rate upwards again, this would have spiked interest rates further, making loans more expensive for Kenyans and business entities.

CBK says the decision is meant to maintain a balanced approach between price stability and economic growth, adding that the previous rate hike was still being absorbed in the economy.

Hints of postive growth

The committee further noted that tightening of the monetary policy in November 2022 was meant to anchor inflationary pressures which were still cushioning the economy.

“MPC concluded that the current monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 8.75 per cent,” the CBK said.

This action will complement recent government measures to allow limited duty-free imports of specific food items, which are expected to moderate prices and further ease domestic inflationary pressures.

The retention of interest rates at 8.75 per cent is also expected to have a positive impact on the economy, as it will encourage borrowing and investment, leading to increased economic activity.

Holding interest rates will also likely signal to banks that interest rates surge could be coming to an end as global inflation eases.

“The committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary. The Committee will meet again in March 2023, but remains ready to re-convene earlier if necessary,” the regulator said.

Recent inflation data also supports the decision of the Monetary Policy Committee to retain interest rates, having dropped from 9.5 per cent in November, which indicates that the country is making progress in controlling prices. This is good news for consumers as it means that their purchasing power will not be eroded by rising prices.

Growth in the private sector credit, which stood at 12.5 per cent in 2022 compared to 8.6 per cent in 2021, is a positive sign of progress.

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