Kenya’s central bank ditches ‘wait and see approach’, cuts lending rates to 9.0%

Kenya’s central bank has ditched the ‘wait and see’ approach adopted by some African countries central bank policy authorities such as Nigeria, Ghana and South Africa.

According to the monetary policy committee, the east African country took the decision to cut its benchmark lending rate to 9.0 percent on Monday from 9.50 percent saying inflation expectations were well anchored within the target range.

“Furthermore, economic output was below its potential level, and there was some room for further accommodative monetary policy,” the bank said in a statement.

“Consequently, while noting the risk of perverse outcomes, the committee decided to lower the Central Bank rate to 9.00 percent.”

At its last meeting in May, the central bank held its key lending rate, saying the previous rate cut was yet to be fully felt. The bank last slashed the rate by 50 basis points in March, saying the economy needed a boost.

Kenya’s inflation rose to 4.28 percent in June from 3.95 percent the previous month, staying within the government’s preferred medium term band of 2.5-7.5 percent.

Policymakers have expressed concerns that a cap on commercial lending rates in place since late 2016 had made it difficult to assess the effectiveness of monetary policy actions.

The cap was set at four percentage points above the central bank rate.