With stable macro-economic fundamentals, MPC tipped to retain lending rate

The Central Bank of Kenya (CBK) has approved the acquisition of 100 percent shareholding of National Bank Limited (NBK) by KCB Group PLC.

Analysts and economists expect the Monetary Policy Committee (MPC) to leave the benchmark lending rate unchanged at 9.00% largely on stable macro-economic fundamentals. when it meets Monday.

Genghis Analysts and Cytonn Investments are of the view that the committee will adopt a wait and see stance given the macroeconomic environment is relatively stable.

“We expect the MPC to maintain the CBR at 9.0% in the January meeting due to the potential of perverse outcomes on growth ensuing from a policy change, the current stable macroeconomic environment and increasing uncertainty in the global economy,” Genghis Capital.

However, “The key concern, however, remains the effectiveness of monetary policy with the interest rate cap still in place,” notes Cytonn Investments.

Stephanie Kimani, research economists at Commercial Bank of Africa (CBA), state “I see the MPC maintaining its current accommodative stance supported by a benign inflation outlook.”

“While lower oil prices will provide the CBK with some near-term respite, we expect the central bank rate to be kept on hold until quarter three when the recovery in lending may provide the rationale for a new tightening cycle. In holding the base rate steady in its November meeting, the MPC cited October’s fall in inflation to 5.3% from 5.7% in September, mainly driven by lower food prices that offset the increase in fuel costs.

The Monetary Policy Committee (MPC) of the Central Bank of Kenya (CBK) last met on November 27th, 2018 and maintained the CBR at 9.0%, citing a stable macroeconomic environment.