Benchmark rate retained at 8.5pc to spur growth

The Central Bank Rate has been retained at 8.5 per cent to encourage further growth across the economy.

The Monetary Policy Committee noted in its first meeting this year that the strong growth in manufacturing and building and construction in the third quarter of 2013 indicated growth was picking and it was necessary to retain the rate at same the level to spread the growth across the economy.

“The co-ordination between monetary policy and supportive growth-oriented fiscal policy continues to generate inflation and exchange rate stability, increased capital flows and improved environment for financial intermediation,” read a statement signed by Central Bank governor and MPC chairman Njuguna Ndung’u.

MPC market perceptions survey conducted in December showed private sector expected inflation and the exchange rate to remain stable and strong growth to be realised in 2014.

The committee noted that the recent visit by IMF managing director Christine Lagarde and her endorsement of the country’s macro-economic policies have provided a signal to potential investors on economic recovery.

The committee said overall inflation had continued to decline and remained within range and month-on-month inflation had declined from 7.36 per cent in November to 7.15 per cent in December.

The annual growth in private sector credit increased from 18 per cent in October to 20 per cent in November while the number of loans increased from 109,260 in October to 129,751 in November.

The bank lending rates declined from an average of 19.73 per cent in 2012 to 16.8 per cent in 2013, that the MPC said was consistent with its monetary policy.

The exchange rate stability was also sustained within a narrow range of Sh85.72 and 86.72 in December compared to Sh85.27 and Sh86.99 in November.