NAIROBI, Kenya– The Central Bank of Kenya (CBK) has retained the base interest rate charged on loans at 13pc.
The regulator explained that the policy taken by the Monetary Policy Committee (MPC) will ensure stability in the country’s inflation and the exchange rate.
“The monetary policy stance will ensure that overall inflation remains stable around the mid-point of the target range in the near term, while ensuring continued stability in the exchange rate,” said CBK governor Kamau Thugge, in a statement released on Wednesday, June 5.
Kenya’s inflation
In May 2024, the Kenya National Bureau of Statistics reported inflation at 5.1pc, compared to 5pc recorded in April 2024.
Food inflation stood at 6.2pc up from compared to 5.6pc in April, reflecting increases in prices of select food items.
The Prices of key food items like maize, sugar, and wheat flour declined following improved supply in the market.
Fuel inflation declined to 7.8pc during the same month from 8.3pc in April, showing a drop in pump prices and lower electricity prices.
“Overall inflation is expected to remain stable around the mid-point of the target range in the near term, supported by the stable exchange rate, improved food supply attributed to favourable weather conditions, stable fuel prices, and the impact of monetary policy actions which continue to filter through the economy,” CBK statement read in part.
Is high Central Bank Rate Affecting Bank Loans?
According to the regulator, commercial bank lending to the private sector dropped to 6.6% in April 2024 compared to 7.9 percent in March 2024.
CBK attributed the drop partly to the exchange rate valuation effects on foreign currency denominated loans following the appreciation of Kenya shilling during the period.
This came as lenders increased interest rates charged on loans to customers to align with the 13% CBR.
In February 2024, Equity Bank increased its loan interest rates from 17.56% to 18.24%, applicable to all Kenya shilling denominated credit facilities.
In April 2024, NCBA bank raised its loan interest rates to 17.5% from 16.5% for shilling-denominated loans and from 11% to 11.75% for dollar denominated loans.
