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Kenya Resumes Cutting Interest Rates to Support Economy

Kenya’s central bank resumed cutting interest rates to support the economy after peaceful elections two months ago helped to ease investors’ concerns that the vote would destabilize the country.

The Monetary Policy Committee, led by central bank Governor Njuguna Ndung’u, cut the benchmark interest rate by 100 basis points to 8.5 percent, the Nairobi-based bank said in an e- mailed statement today. The median estimate of eight economists surveyed by Bloomberg was for the rate to be lowered to 9.25 percent.

Inflation was unchanged at 4.1 percent in April, below the government’s target of 5 percent, giving the central bank room to ease borrowing costs. Elections in March didn’t repeat the violence that followed disputed polls six years ago, allowing policy makers to focus on spurring East Africa’s biggest economy.

“The central bank will look to support economic growth now that the elections are over,” Eric Munywoki, a research analyst at Nairobi-based Old Mutual Securities Ltd., said by phone before the decision. “I also don’t see government borrowing at high rates now.”

Uhuru Kenyatta defeated former Prime Minister Raila Odinga in the March 4 presidential vote, pledging to boost economic growth to 10 percent a year from a projected 5.6 percent in 2013.

The MPC lowered its benchmark rate by 8.5 percentage points between July and January, and left it unchanged at 9.5 percent in March. The shilling has gained 2.6 percent against the dollar since the election.

To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net; Paul Richardson at pmrichardson@bloomberg.net

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