The Central Bank’s Monetary Policy Committee (MPC) has retained its key lending rate at 11.5 per cent for the third time in a row in line with analysts’ forecast.

MPC chairman Dr Patrick Njoroge, said measures taken on September 22 meeting had stabilized the market, except for the significant rise in the Treasury bills.

Dr Njoroge said he expected banks to withdraw notices to increase interest rates, a move already taken by Equity, Barclays and Standard Chartered banks.
“The CBK is closely monitoring the sector and continues to address and support financial stability”, Dr Njoroge said.  In particular, it notes the recent reduction in short-term interest rates expects them to be transmitted to commercial lending rates.”
The 91-day T-bill peaked at 22.5 per cent on October 22 due to a Kshs.45 billion shortfall in the Kshs.38.5 billion targeted tax revenues in four months to October.
The signing of a Kshs.61.20 billion international syndicated loan on October 29 has, however, helped slow down the 91-day T-bill yield to 9.65 per cent at the auction two weeks ago.
Dr Njoroge said the core inflation, which excludes food and fuel and which the CBK has control over, has declined to 2.5 from 3.4 per cent over the last three months despite rising to 4.8 last month from 4.7 per cent in September.
Overall inflation is also still within the 2.5 to 7.5 per last month from 5.97 per cent.
“The Committee concluded that the monetary policy measures in place are appropriate to maintain market stability and anchor inflation expectations,” the governor said in a statement.
Analysts had warned lowering the CBR rate, last set on July 7, would have exerted renewed pressure on the shilling which has appreciated by 2.96 per cent since CBK’s last meeting in September through last Friday’s opening levels of 102.24.
Dr Njoroge however reassured that the CBK was working closely with the National Treasury to strengthen the co-ordination of monetary and fiscal policies to support overall macroeconomic stability.