CBK spares borrowers rates increase for the seventh time

Borrowers have been spared higher cost of loans after the Central Bank of Kenya (CBK) retained its benchmark lending rate at 9.0 per cent for the seventh time in a row, even as lenders continue to withhold credit to the private sector.

The Monetary Policy Committee said it held rates in an environment where inflation expectations were within the target range and the economy was operating close to its potential.

“However, there is need to be vigilant on the possible effects of the recent increases in fuel prices, the ongoing demonetisation, and the increased uncertainties in the external environment,” CBK Governor Patrick Njoroge said in a statement following Wednesday’s MPC meeting.

The MPC said private sector credit had grown by 5.2 per cent in the year to June, compared to 4.4 per cent in May.

The credit growth remained well below the central bank’s target rate of 12-15 per cent, a growth adequate to support economic development.

Bankers say the cap limiting commercial lending rates to four percentage points above the benchmark has forced them to cut back on loans to high-risk groups. Normal bank lending is capped at 13 per cent.