On November 25, 2019, the Central Bank of Kenya's Monetary Policy Committee made a crucial decision to revise downwards the benchmark lending rate by 50 basis points to 8.50 percent.
This move is expected to bolster suppressed growth, as the economy operates below its potential level. The committee noted that inflation rate stood at 4.9 percent in October, mainly reflecting temporary effects of increases in the prices of maize grain and sifted flour.
The repeal of the interest rate cap has been welcomed by the committee, which predicts a credit growth in the private sector due to innovative credit products targeting the sector.
Private sector credit grew by 6.6 percent in the 12 months to October, compared to 7.0 percent in September. The committee expects minimal movement in the financial sector as a majority of lenders will not review their rates.
Chairman Wilfred Kiboro of Family Bank, which has become the latest bank to say it will not revise its lending rates despite the rate cap abolition, expects minimal movement in the financial sector.
