This archive report was first published on 26 November 2019.
On November 26, 2019, the Central Bank of Kenya (CBK) lowered the benchmark lending rate by 0.5 percentage points, a move that is expected to lower restrictions on individual borrowers.
The Monetary Policy Committee (MPC) - CBK's organ responsible for the formulation of monetary policy - lowered the Central Bank Rate (CBR) to 8.5 per cent, down from nine per cent, citing the National Government's austerity measures as one of the main reasons for the adjustment.
The apex bank had left the lending rate untouched for the better part of the interest rate cap regime that came into effect in September 2016.
CBK Governor Patrick Njoroge noted that inflation expectations remained well anchored within the target range and assessed that the economy was operating below its potential level.
However, the government's appetite for debt could spoil the party as the rate at which Treasury issues its securities will determine the lending rate to households and firms.
Dr Njoroge has insisted that banks should not go back to the prohibitive rate of pre-September 2016, noting that several developments have been made to remedy this problem.
Under the controlled regime, banks would have charged interest rates of 12.5 per cent as the law required lenders to price loans at four percentage points above the CBR.
