By Ronald Owili
Economists project that the Central Bank is likely to retain the base lending rate at 10 percent when the Monetary Policy Committee meets Monday afternoon.
The stability of the local currency coupled with the need for private sector credit growth are expected to override inflationary pressure concerns during the policymakers meeting.
Dry weather patterns experienced in recent months have seen at least 23 counties severely affected by famine. This has pushed up the cost of food items that has seen the rate of inflation exceeding the government’s upper target of 7.5 percent to the current 9.04 percent, which is a four year high.
However, the onset of the long rains could ease the situation with food prices expected to start reducing in a months’ time.
In the forex market, the narrowing current account has aided the stability of the local currency which was mean rated at 102.94 in early morning trade.
This is helped by 6.9 million dollars in central bank foreign exchange reserves, equivalent to 4 and a half months of import cover.
Of concern as the MPC meets is the stifled private sector lending which has been slowing in recent years and negatively impacted by the capping of interest rates in October last year.
Private sector credit growth slowed to 4.3 percent as at December 2016 as banks sought to minimize risks associated with lending.
As Kenyans head to the ballot this August, banks and non-bank private sector firms expect strong growth this year supported by infrastructural investment by the government, tourism recovery and relatively lower fuel prices.
With these prevailing conditions, analysts project that policymakers of the central bank will leave the benchmark lending rate unchanged at 10 percent when they meet.