Kenya’s central bank on Wednesday announced that it had cut its benchmark interest rate following a meeting of the Monetary Policy Committee amid a worsening economic outlook occasioned by the coronavirus pandemic.
The Central Bank of Kenya (CBK) slashed the interest rate from 7.25 percent to 7 percent, the lowest since September 2011, in what is the fourth consecutive lowering of the benchmark rate.
“The Committee noted that the policy measures adopted in March were having the intended effect on the economy, and are still being transmitted. 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 percent from 7.25 percent,” a statement signed by CBK Governor Patrick Njoroge read in part.
The CBK added that the banking sector remained stable and resilient with strong liquidity and capital adequacy ratios.
According to the CBK, overall inflation in the country is expected to remain within the target range in the short term despite the negative effects of the coronavirus pandemic. Other factors that are expected to contribute to this are favorable weather conditions, lower international oil prices and the reduction of Value Added Tax (VAT).
“The MPC will closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary,” the statement added.
The Monetary Policy Committee is scheduled to meet within a month to review the economic outlook.
Kenya’s economy has taken a hit since the onset of the pandemic in the country with the tourism and hospitality sector, one of its biggest earners, seeing several job losses and businesses shut down.
On Tuesday, Kenya’s National Treasury Cabinet Secretary Ukur Yatani downgraded Kenya’s 2020 economic growth outlook to between 1.8 percent and 2.5 percent from the forecasted 6 percent due to the COVID-19 pandemic.
