Central Bank of Kenya on Wednesday kept its benchmark lending rate at 7.0 percent saying the current accommodative stance remained appropriate.
“The policy measures adopted in March and April were having the intended effect on the economy, and are still being transmitted,” the bank’s Monetary Policy Committee said in a statement.
Economists, Cytonn Investments and Genghis Capital, had widely expected the MPC to hold the benchmark rate at the current level.
However, NCBA Analysts had noted that the CBK) still had some room to maneuver. According to them, the MPC would have slashed the central bank rate (CBR) by up to 25bps. This could have seen CBR fall to 6.75 percent – the lowest in close to 9 years.
“Though cutting the policy rate communicates the CBK’s intent of supporting the economy, the benefits of a lower policy rate environment may be somewhat lost during this uncertain time. Complimentary tools may be needed to ensure that the intended benefits of accommodative monetary policy reach targeted audiences,” they had noted
In the Wednesday meeting, Dr. Patrick Njoroge said: “The MPC will continue to closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary.”
Further, the MPC said the banking sector remains stable and resilient, with strong liquidity and capital adequacy
“The lowering of the Cash Reserve Ratio (CRR) in March released Ksh 35.2 billion to the banking sector, and continues to be transmitted through the economy,” says Njoroge.
The committee said there were adequate foreign exchange reserves currently stand at USD8,341.5 million (5.02
months of import cover), continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.
NCBA had further noted that the excess reserves held at the central bank have averaged over Ksh 30.00 Billion on a weekly basis while banks currently boast a healthy 51.00% liquidity ratio as at the end of April 2020.