On October 23, 2019, Central Bank of Kenya (CBK) Governor Patrick Njoroge hinted that the bank could cut interest rates in November if the lending cap is lifted.
CBK will be under pressure to ensure lending rates do not rise, but can only act in the next meeting of the Monetary Policy Committee (MPC) scheduled for November 25, 2019.
According to Patrick Mumu, a Research Analyst at Genghis Capital Ltd., there is an increased possibility of a 50 basis points to 100 basis points rate cut in the November MPC meeting, especially if the rate caps are repealed.
Mr. Mumu noted that the economic environment is similar to that of the last rate cut in 2018, with lower inflation, improved but low private sector credit growth, and a steady currency.
There is a wave of monetary stimulus in the global markets, which could influence CBK's decision.
During the last MPC meeting, Governor Njoroge said the Treasury budget cuts had given CBK scope to lower the Central Bank Rate (CBR). However, the rate cap has been a hindrance to such a cut, as it interferes with policy transmission and makes banks reduce lending to the private sector.
CBK abolished the Kenya Bankers Reference Rate (KBRR) that was used to give a direction of how much banks charged customers.
