The Central Bank of Kenya (CBK) has lowered its lending rate to 7.25% from 8.25% to cushion borrowers from the effects of coronavirus.
The bank’s Monetary Committee met on Monday and noted that the global economic outlook is uncertain due to the pandemic, it, however, could not reveal the extent of the adverse effects on the Kenyan economy because it is still evolving.
“Against this backdrop, the committee deliberations focused on minimizing the economic and financial impact,” reads a statement from CBK. It noted that the overall inflation is expected to remain within the target range in the near term, reflecting lower food prices with favourable weather conditions, a decline in international oil prices and demand pressures.
The Monetary Policy Committee also decided to reduce the Cash Reserve Ratio (CRR) to 4.25 percent from 5.25 percent, releasing Sh35.2 billion as additional liquidity availed to banks to directly support borrowers that are distressed as a result of COVID-19.
Additionally, CBK will ensure that the interbank market and liquidity management across the sector continue to function smoothly.
“The MPC will closely monitor the impact of this change to its policy stance, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary,” the regulator said in a statement to media houses.
“In this regard, the Committee decided to reconvene within a month for an early assessment of the impact of these measures and the evolution of the COVID-19 pandemic.”The meeting was held against a backdrop on MPC’s deliberations focused on minimizing the economic and financial impact, noting the following:
Overall inflation is expected to remain within the target range in the near term, reflecting lower food prices with the favourable weather conditions, a decline in international oil prices and muted demand pressures.