Kenya's central bank cuts benchmark rate

Nairobi, July 6 (IANS) Kenya's Central Bank (CBK) has reduced its interest benchmark rate (CB Rate) to 16.5 percent from 18 percent to bring inflation towards the medium-term target and sustain general price stability, reported Xinhua.

The Monetary Policy Committee (MPC) which met in Nairobi believed the range of monetary policy instruments in use was robust, CBK Governor Njuguna Ndung'u said.

"The Committee therefore decided to reduce the CBR by 150 basis points to 16.5 percent," Ndung'u said in a statement released in Nairobi.

Economics analysts said the move will be welcomed by the borrowers since the cost of borrowing, which stood at 14 percent last year, shot up to 25 percent in recent months as inflation edged upwards above the CBK's single-digit curb.

During the meeting, MPC observed the monetary policy measures adopted continued to deliver favourable macroeconomic outcomes as inflation continued to decline while the

exchange rate remains stable.

"This follows the recent turbulence in the global foreign exchange markets which was mainly attributed to instability in the eurozone and the effects of oil prices," the governor said.

Market analysts said the move by the country's apex bank to cut the benchmark rate will put more pressure on commercial banks to reduce interest rates on loans from current 28 percent (24 percent base lending rate).