Kenya central bank slashes rates, inflation risks low
Kenya - Economic - 07-29-2010

Kenyaquotes central bank unexpectedly cut its benchmark interest rate to 6.00% from 6.75% on 28 July 2010 and said there was room for commercial banks to lower their lending rates further. The central bank said in a statement that upside risks to inflation remained low given an adequate supply of food, exchange rate stability and low energy prices. It also said indicators showed the economy was continuing to strengthen. quoteThe Committee took the view that commercial banks and the private sector needed a strong signal in order to provide them with information that overall downside risks were declining,quote the central bank said in a statement. quoteEven though the banks had generally lowered their base and lending rates, the Committee noted that there is scope to lower the rates further,quote the bankquotes Monetary Policy Committee said.

Kenyaquotes y-o-y inflation has been mostly on an easing trend since May 2009 and came in at 3.2% in June 2010 as food prices dipped, well below the central bankquotes medium-term target of 5%. quoteWith inflation coming down, CBK is signalling the low rate regime will be supported for now. They are also looking to support the economic growth momentum we have seen in recent quarters,quote said Dickson Magecha, a trader at Diamond Trust Bank. David Cowan, Africa economist at Citi in London, had forecast a cut of at least 50 basis points given the benign inflation outlook and slump in Treasury bill yields in 2010.

Source: Reuters