Kenyans to pay more for loans after the latest CBK review
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Kenyans set to pay more in loan interest rates after the CBK raised the Central Bank Rate (CBR) from 8.75 percent to 9.50 percent
Kenyans set to pay more in loan interest rates after the CBK raised the Central Bank Rate (CBR) from 8.75 percent to 9.50 percent.
Through a statement issued on Wednesday, March 29 from the Monetary Policy Committee (MPC) the raising of the lending rate was occasioned by national and global circumstances.
The Central Bank of Kenya (CBK) assured Kenyans that although the lending rate had gone up, the country was on the right path toward economic stability and prosperity.
“MPC met against a backdrop of continued global uncertainties, a weak global growth outlook, easing inflationary pressures, geopolitical tensions, and measures taken by authorities around the world in response to these developments,” CBK revealed what informed the decision to review lending rates.
MPC revealed that inflation in the country jumped to 9.2 percent in February 2023 from 9.0 percent in January.
“This was a result of; a rise in food prices attributed to prolonged drought, scaling down of the fuel subsidy and increases in electricity prices due to higher tariffs,” a statement from CBK revealed.
CBK revealed that inflation would remain elevated in the near future due to an increase in electricity prices.
“Nonetheless, the long rains will moderate food inflation in the coming months,” CBK gave a flicker of hope to Kenyans.
On how global events have shaped the lending market, CBK stated, “Uncertainties in the global economic outlook have increased, reflecting concerns about financial sector stability in the advanced economies, continuing geopolitical tensions particularly the ongoing war in Ukraine, and the pace of monetary policy tightening in the advanced economies.”
CBK spoke of positives in the country that would stabilize the economy in long term and reduce CBR.
“The economy is expected to remain resilient in 2023 despite the global uncertainties, supported by a continued strong performance of the services sector and expected recovery in agriculture,” CBK stated.
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CBK further allayed fears that the country was running low on foreign exchange reserves.
“The CBK foreign exchange reserves, which currently stand at USD 6,493 million (3.62 months of import cover), continue to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market,” Kenyans were assured.
CBK noted that the Committee would meet again in May 2023, but remained ready to reconvene earlier if necessary.
Section 36 (4) of the Central Bank of Kenya Act stipulates that the Central Bank shall publish the lowest rate of interest it charges on loans to banks and that rate shall be known as the Central Bank Rate (CBR).
“The level of the CBR is reviewed and announced by the Monetary Policy Committee (MPC) at least every two months and its movements, both in direction and magnitude, signals the monetary policy stance. The CBR is the base for all monetary policy operations in order to enhance clarity and certainty in monetary policy implementation,” reads a statement by CBK on its website.
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