The Central Bank of Kenya (CBK) has retained interest rates, signalling confidence in the stable market. In a statement, the bank said the decision was meant “to continue to anchor inflation expectations”.
Central Bank’s Monetary Policy Committee (MPC) which meets every month retained the Central Bank Rate (CBR) at 11.50 percent. This retention was the fifth in a row.
The Kenya Banks’ Reference Rate (KBRR) was retained at 9.87 percent. The CBK reviews KBRR every six months and arrives at it through a calculation of the average Treasury bill rate in the past two months before a review and the Central Bank rate (CBR).
Treasury bill rates shot to above 20 per cent before sliding back to average 10 per cent in the last two months of 2015. In the two months to June 2015, the T-bill rates stood at an average of eight per cent.
Central bank noted that
The economy remained strong in the third quarter of 2015, posting a growth rate of 5.8 percent compared to 5.2 percent in a similar period of 2014. Significantly, the CBK Market Perception Survey of January 2016, showed increased optimism for improved business conditions and stronger growth in 2016, largely due to strengthened macroeconomic environment, continued public investment in infrastructure, lower oil prices, improving tourism performance, and a higher country profile.
By retaining the interest rates, borrowers can rest easy as the cost of loans is unlikely to shift. This is a boost to the growing economy, requiring capital for various development expenditures.