Kenya’s Monetary Policy Committee (MPC) says there is adequate liquidity in the financial system to support growth in the near term.
This means the central bank is likely to keep the benchmark interest rates unchanged at 7.00 per cent.
“Lowering the rate is to achieve a certain objective. There is a lot of liquidity in the system. What will be the purpose of lowering the rate? Dr Patrick Njoroge said Thursday.
“In terms of liquidity management, at the end of June and beginning of July,…We did have a huge influx of liquidity. A lot of these was used to make payments to pending bills and to the counties.”
“The liquidity will move through the economy. This is very positive in terms of growth going forward,” he disclosed.
However, the MPC had noted that the economy has persistently operated below its potential level, due to the impact of the coronavirus impact.
“The MPC will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary,” Governor Patrick Njoroge said in a statement.
The CBK’s monetary policy committee (MPC) kept the lending rate unchanged at 7.00 per cent on Wednesday for a ninth straight meeting.
“Given that the decision by MPC was largely expected, prices across all asset classes, including the yield curve, foreign exchange and equities should be neutral to the outcome.
While there may be scope to further ease policy, challenges in transmission, amid elevated credit risks, could act as a deterrent.
The non-performing loan (NPL) ratio has held in double digits and was recorded at 14.00% of GDP in June 2021.
This has induced a slowdown in lending to the private sector despite the banking sector reporting strong liquidity and capital adequacy ratios. Private sector credit growth stood at 7.70% in the same period,” Stephanie W. Kimani, NCBA Research.