Kenya Cuts Key Rate to 10%

The Central Bank of Kenya lowered its benchmark interest rate by 50bps to 10 percent at its September 2016 meeting, surprising markets who expected no changes. It was the second rate cut so far this year, amid a decline in private sector credit growth while the inflation remained within the government target range.

Policymakers noted the inflation rate slowed to 6.3 percent in August of 2016 from 6.4 percent in July, remaining within the government’s target range. Also, the foreign exchange market remained stable, reflecting a narrower current account deficit due to higher tea and horticulture exports and lower oil imports. The central bank said the inflation is expected to decline in the short-term on moderate demand pressures.

Policymakers also showed concerns about a slowdown in private sector credit, which pose risks to growth. Concerns come a week after commercial banks' lending rates were capped by law. The government ordered commercial banks to limit lending rates to 4 percentage points above the key rate.

Joana Taborda |
9/20/2016 5:37:45 PM