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Central Bank of Kenya Maintains CBR at 7.0 Percent

The Central Bank of Kenya through the Monetary Policy Committee yesterday maintained the benchmark lending rate (CBR) at 7.0% with the policy measures adopted in March and April to mitigate the adverse effects of the COVID-19 pandemic having the intended effect on the economy.

The hold in the Central Bank Rate was supported by inflation stability with inflation rate at 5.6% in April.

Going forward, the CBK expects the rate to remain within the set target range of 2.5% to 7.5%, supported by improved food supply due to favorable weather conditions, lower international oil prices, the impact of the reduction of VAT and muted demand pressures. Also, a notable growth was noted in the private sector credit of 9.0% in the 12 months to April 2020 from 7.1% in December 2020, attributable to the growth in the manufacturing sector, trade, transport and communication building and construction and consumer durable.

The banking industry continues to remain resilient backed up by strong liquidity and capital adequacy.

The measures implemented by the CBK on the banking sector continue to support and ease operations whereby the average number and value of bank to e-wallet transactions increased by 488,000 transactions per week, valued at Kes 166.00 mn attributable to the  waiving of charges by the CBK on mobile money bank account to electronic wallet transfers.

The GDP growth in 2020 is expected to decline by 310bps to 2.3% from 5.4% in 2019, attributable to the adverse impact of the containment measures, particularly in transport and storage, trade and accommodation and restaurants with persistent inactivity in business.

The fiscal measures under the Economic Stimulus program are set to cushion vulnerable citizens and businesses and will majorly focus on the key sectors of the economy  which will be implemented efficiently in FY’ 2020/21.

The Committee is expected to reconvene after a month to discuss and take additional measures if necessary in regards to the global and domestic economy impacted by the COVID-19 pandemic.