Nairobi, Sep 6 (IANS): Kenya's central bank CBK has slashed benchmark lending rate by 350 basis points to 13.0 percent from the previous 16.5 percent to allow more borrowing from banks.
The CBK's Monetary Policy Committee (MPC), which met Wednesday to review market developments and evaluate the outcomes of its monetary policy stance, cited the falling inflation, stable currency and a strong banking sector as some of the factors that contributed to the reduction of the Central Bank Rate (CBR), reported Xinhua.
"Short-term interest rates remained generally stable following the downward adjustment of the CBR during the last MPC meeting. In addition, sustained Open Market Operations have ensured effective liquidity management and orderly behaviour in the interbank market," MPC said.
The committee in a statement after the meeting in Nairobi, also recognized that there remain risks to those elements relevant to monetary policy in maintaining macroeconomic stability.
These, it said, include vulnerability to international oil prices and any likely impact of drought affecting world food prices.
"The slowdown in global economic growth was also noted to have a dampening effect on both domestic growth and the balance of payments. Going forward, the CBK will continue to monitor these risks and take appropriate actions," MPC said.
The East African nation's overall inflation declined in August to 6.09 percent and was within the upper band of 7.5 percent set by the government for the fiscal year 2012-13.
"All the categories and measures of inflation, including those for all income groups, declined in August, reflecting the trend of declining inflationary pressure," CBK said.
The overall inflation declined from 10.05 percent in June to 7.74 percent in July and further to 6.09 percent in August.
The decline in the overall inflation was supported by a continued reduction in food and fuel prices as well as easing demand pressures in the economy.
Non-food-non-fuel inflation declined from 8.48 percent in July to 7.84 percent in August while the three-month overall inflation also declined in the period.
"These developments supported a positive outlook for a continued decline in inflation," the Committee noted during their deliberations.