Kenya’s central bank kept its benchmark lending rate at 7.0% on Wednesday, as expected, judging that its current accommodative stance remained appropriate, the Monetary Policy Committee said in a statement.
The committee has cut its main interest rate by a total of 125 basis points over two meetings to support the economy since its first case of the new coronavirus was reported in mid-March.
“The policy measures adopted in March and April were having the intended effect on the economy, and are still being transmitted,” the committee said in a statement.
Banks remain stable, it said, and fiscal stimulus introduced by the government would kick in strongly in the financial year starting in July.
At its March meeting the committee reduced the amount of cash that lenders are required to set aside, unlocking 35.2 billion shillings for lending.
“To date, 82.6% of the funds (or 29.1 billion) has been channeled to support lending, especially to the tourism, transport and communication, real estate, trade and agriculture sectors,” the committee said.
Bank loans worth 273 billion shillings, 9.5% of the total, have also been restructured due to coronavirus-related hardships.
A Reuters poll of nine economists had forecast no change in rates, but Razia Khan, head of research for Africa at Standard Chartered in London, said recent pressure on the shilling might have forced the bank to retain rates.
“Given the downside risks to the economy this year, we still expect to see a CBR (central bank rate) at 5.0% by the year end,” she said.
The committee said there were adequate foreign exchange reserves to cushion the country against short-term shocks, and it said fresh produce exports, a key source of hard currency, were starting to normalize.
