Relief for borrowers as CBK cuts benchmark rate
Central Bank Governor Njuguna Ndung’u. CBK cut its key benchmark rate to 13 per cent from 16.5 per cent, offering borrowers relief September 5, 2012.
What you need to know:
- Central Bank of Kenya says cut followed reduction in inflation rates.
Cut is now expected to signal commercial banks to reduce their lending rates which are currently averaging between 18 to 20 per cent.
The banking sector regulator has cut its key benchmark rate to 13 per cent from 16.5 per cent, offering borrowers relief.
The Central Bank of Kenya said in a statement Wednesday that the cut followed reduction in inflation rates.
The high interest rates were threatening to choke the economy and had already started taking their toll on the banking industry which saw a sharp increase in default rates.
Its policy setting organ, the Monetary Policy Committee (MPC) which met Wednesday to review market developments and evaluate the outcomes of its monetary policy stance noted that the monetary policy stance continued to deliver the desired results on inflation and stability in the foreign exchange market.
It, however, noted that there still remain risks to the economy.
“The Committee also recognised that there remain risks to those elements relevant to monetary policy in maintaining macroeconomic stability. These include vulnerability to international oil prices and any likely impact of drought affecting world food prices," read a statement signed by the CBK governor Prof Njuguna Ndung’u.
"The slowdown in global economic growth was also noted to have a dampening effect on both domestic growth and the balance of payments. Going forward, the CBK will continue to monitor these risks and take appropriate actions,”
The rate cut is now expected to signal commercial banks to reduce their lending rates which are currently averaging between 18 to 20 per cent.
“Based on the above considerations the Committee decided to reduce the CBR by 350 basis points to 13.0 per cent,” the MPC statement read in part.
