Kenya Likely to Keep Benchmark Interest Rate at Record Low, Survey Shows
Kenya’s central bank will probably leave its benchmark interest rate unchanged tomorrow for the second consecutive meeting after commercial bank lending picked up, a survey showed.
The central bank’s Monetary Policy Committee will keep the key lending rate at a record low of 6 percent, according to all four economists surveyed by Bloomberg News. The Nairobi-based Central Bank of Kenya will announce the decision in the afternoon.
“With real GDP growth, and growth in domestic credit picking up, against the background of exchange rate stability, they may adopt a wait and see approach,” David Cowan, Citigroup’s Africa economist in London, said in an e-mailed response to questions on Nov. 22.
Six interest rate cuts since March last year helped bank loans and advances rise 6 percent to 878.8 billion shillings ($11 billion) in the third quarter, central bank data showed. The growth in lending is yet to impact on inflation, which has stayed below the government’s 5 percent target for the last eight months after ample rains improved food supplies.
“The central bank will want to hold to try and see where things go,” said Ben Nyamweya, a Nairobi-based independent financial analyst. “Banks are fairly liquid, rates have been coming down slowly, and I can’t see what they’d be seeking to achieve with a further cut.”
The average lending rate among Kenya’s 43 commercial banks declined to 13.98 percent in September from 14.18 percent a month earlier.
Still, the central bank may choose to resume cutting the benchmark interest rate, Governor Njugunga Ndung’u said Oct. 25.
Inflation slowed to 3.1 percent in October, compared with 3.2 percent a month earlier, the Nairobi-based Kenya National Bureau of Statistics said on Nov. 1.
The Kenyan government expects the economy to expand 5 percent in 2010, the most in three years, and 6 percent the next. By comparison, the International Monetary Fund expects economic growth in Kenya to accelerate to 2.3 percent in 2010 and 4 percent in 2011.
To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at email@example.com.