The move comes after the bank’s Monetary Policy Committee (MPC) concluded that the inflationary pressure in the economy was muted and the inflation was expected to decline in the short term.
The government capped lending rates last September at 4 percentage points above the CBK rates stating that they were too high and banks had adamantly failed to lower them
Briefing journalists on the outcome of MPC meeting on its policy decisions and recent economic developments, CBK Governor Patrick Njoroge said that MPC will continue to monitor the impact of the interest rate caps on the effective transmission of monetary policy.
Njoroge revealed that the economy is expected to grow by 5.1 percent in 2017 and pick up strong in the Medium term which will be supported by microeconomic environment.
He said the economy growth has remained strong despite the effects of the drought experienced in the first half of 2017.
The Governor said growth has been mainly supported by the service sectors which include the Micro Small and Medium Enterprises (MsMEs).
Njoroge said Private sector credit grew by 2.0 percent in the 12 months to October compared to 1.7 percent in the 12 months to September. This maintained the upward trend since August 2017.
He added that credit to the domestic trade, Manufacturing, and real estate sectors grew by 12.6 percent and 10.0 percent respectively to October 2017.
He noted that foreign exchange market has remained stable and supported by strong diaspora remittances, resilient tea and horticultural exports and the continued recovery in the tourism.
According MPC, market survey conducted in November 2017 showed that inflation was well anchored and is expected to decline in the short term.
The survey also showed optimism in the economic prospects with the conclusion on the elections, improved weather conditions, and continued public investment in infrastructure.
Source: Kenya News Agency