Central Bank of Kenya holds key lending rate at 8.5pc

Kenya: Central Bank of Kenya held its key lending rate at 8.50 per cent yesterday, saying this would ensure inflation continued to fall towards a 5 percent target.

The bank’s Monetary Policy Committee also said it was cutting the reference rate, which banks use as a base rate for calculating commercial lending, to 8.54 per cent from 9.13 set in July. The rate is set each six months.

The committee met to review market developments and the outcomes of its previous monetary policy decisions. It said overall inflation continued to decline gradually in November and December 2014 and remained within the range of Government’s medium-term target of 5 per cent but still above the target.

It noted a number of outcomes in the market since its meeting in November 2014 including the fact that overall month-on-month inflation declined from 6.09 per cent in November 2014 to 6.02 per cent in December 2014, mainly reflecting significant declines in the prices of fuel and electricity.

“However, these declines were partly offset by a rise in the food index during the period,” it observed in a statement.

On the other hand, the month-on-month non-food-non-fuel inflation reversed the November 2014 increase and declined from 3.77 per cent to 3.65 per cent in the period.