Kenya central bank holds main rate at 10.0pc

NAIROBI: Kenya's central bank held its benchmark lending rate at 10.0 percent on Monday, saying inflation was expected to remain in the government's preferred band in the short term.

Eight of 10 analysts polled by Reuters had expected the bank's Monetary Policy Committee (MPC) to hold the rate. Year-on-year inflation fell to 6.4 percent in December from 6.7 percent in November, remaining within the government's target of 2.5-7.5 percent.

However, the central bank said there were risks from a drought in the country and from developments in global financial markets but said it too early to assess the impact of the rate cap on lending and the economy. The government imposed a limit for commercial bank lending in September of 400 basis points above the central bank rate. Economists said it risked hurting economic growth by discouraging lending to smaller borrowers deemed more risky.

The MPC also said it had formally scrapped the Kenya Bankers Reference Rate (KBRR), which was designed as a base for banks to price their loans to customers before the rate cap was imposed.