By Kepha Muiruri For Citizen Digital
The Central Bank of Kenya (CBK) is expected to keep its benchmark lending rate- the Central Bank Rate (CBR) unchanged for the 10th straight time.
Analysts widely expect a hold in the key interest rate when the reserve bank stages its Monetary Policy Committee (MPC) bi-monthly meeting on Tuesday as they cite the need for extended support to the economy by the bank.
Analysts at AIB-AXYS Africa for instance expect a hold in rates to anchor down ongoing economic recovery and firm up private sector credit growth which remains depressed since the start of the pandemic.
“Our conviction on the likely stance, is reinforced by the need to support the declining private sector credit growth and the recovery transmission across the economy,” AIB-AXYS said in a fixed income note.
On their part, analysts at Cytonn project a similar hold in the benchmark lending rate but expects the CBK to keep a keen eye on inflation as the cost of living heads towards a new record high at the end of September.
“We are projecting the year on year inflation rate for September 2021 to fall within the range of 6.6 per cent and seven per cent mainly driven by the recent increase in fuel and food prices which are major contributors to headline inflation,” the analysts noted.
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The CBK has largely maintained an accommodating monetary stance through out the pandemic to cushion the economy from effects of the global health crisis.
This to include the lowering of the cash reserve ratio (CRR) to 4.25 per cent from a higher 5.25 per cent to support banks liquidity.
Central banks around the world are however easing off the accommodating throttle with most signalling a normalization in monetary policy to indicate imminent and future hikes to interest rates.
For instance, South Africa’s Central Bank retained its benchmark lending rate at 3.5 per cent last week but said it would be increasing the rate in subsequent meetings.
On the same note, the US Federal Reserve indicated it would be slowing down on asset purchases which have been used in supporting the economy and that it is likely to increase interest rates from 2022.
Domestically, the CBK’s supportive measures have been aimed at maintaining liquidity in the economy to support lending.
The success of the supportive measures however remain the subject of critique by stakeholders in the financial system and the economy.
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