The Central Bank’s Monetary Policy Committee (MPC) meets tomorrow Monday March 21st to review Kenya’s economic performance, with experts expecting a cut in interest rates.
Analysts say the MPC could lower the Central Bank Rate (CBR) by 50 basis point to 11 per cent as an indication to banks to reduce the cost of credit, the Sunday Nation reports. The signal lending rate has been kept at 11.5 per cent for the past five meetings since the last review late last year.
“Given the favourable environment and positive factors outlined above, there is a possibility the MPC may consider lowering the CBR by 50 bps to 11.0 per cent,” said Cytonn Investments.
Cytonn said this could serve as a signal that the interest rates are attractive to the economy at the current levels, and would be in line with the CBK governor’s earlier statement that MPC is working towards lowering rates, anchored by a stable currency and inflation rates.
The committee could, however, leave the rate at the current level to avoid unsettling the environment characterised by a stable currency and growing foreign reserves.
Sterling Capital trader Eric Munywoki also said there was a possibility of lowering the rate, but added that he was of the opinion it should be maintained at the current level.
CfC Stanbic Bank regional economist Jibran Qureishi said he expected the rate to be retained this time and to be lowered in subsequent meetings before September.
“We do not expect it this time, but they may pull a surprise. What we expect is that the economy will be given a tonic in terms of a rate cut before September,” Mr Queirishi said.
Since January, Kenya has experienced some positive news, starting with expectations of a high economic growth rate forecast, with the IMF projecting a 6 per cent GDP growth rate. But inflation could come under pressure in September when the government imposes excise duty on petroleum products.
Mr Qureishi, however, said the excise duty would be a one-off, adding that he was not too concerned about it. He cited a possible delay of the long rains as a bigger threat to inflation.
“If the long rains do not pick up in March, April and May, that may have an impact on food inflation,” he said.
