Cheap loans beckon as CBK slashes key lending rate

Central Bank of Kenya (CBK) yesterday cut further the benchmark lending rate to seven per cent as it moved to inject more liquidity into an economy that has been ravaged by Covid-19 pandemic.  

On March 24, the Monetary Policy Committee (MPC), CBK’s highest decision-making organ, cut the Central Bank Rate (CBR) by one percentage point, signalling banks to provide cheap credit to borrowers distressed by the novel coronavirus.

MPC also resolved to reduce the cash reserve ratio from 5.25 per cent to 4.25 per cent, freeing up Sh35.2 billion that banks could extend to borrowers as they grapple with the adverse effects of the pandemic.

Yesterday, CBK Governor Patrick Njoroge, who chairs the committee, noted that while these measures had started yielding fruits, it still has room for expansionary monetary policy.

“The committee noted that the policy measures adopted in March were having the intended effect on the economy and are still being transmitted," said Dr Njoroge in a statement.

"However, in light of the continuing adverse economic outlook, the MPC decided to augment its accommodative monetary policy stance. The MPC, therefore, decided to lower the Central Bank Rate (CBR) to 7.00 per cent from 7.25 per cent.” 

Private sector credit grew by 8.9 per cent in the 12 months to March this year, with the manufacturing sector experiencing a bump of 17 per cent, building and construction 9.5 per cent and trade 7.8 per cent.

Transport and communication and consumer durables also recorded better growth at 7.1 and 24.1 per cent respectively.

The committee had prior to yesterday's meeting broken away from its three-month sitting ritual, promising to sit earlier to monitor the progress of the economy.