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CBK keeps interest rates on hold, says inflation stable

15 January 2014, 13:08

Nairobi - Central Bank of Kenya held its benchmark lending rate at 8.50 percent for the fourth policy meeting in a row on Tuesday, saying inflation was steady.

Year-on-year inflation fell to 7.15 percent in December from 7.36 a month earlier, within the government's target band of 3.5-7.5 percent.

East Africa's biggest economy, which plans to start marketing a debut Eurobond worth up to $2 billion later this month or in February, has also enjoyed a relatively stable exchange rate for the last two years.

"The Committee concluded that the monetary policy stance had anchored inflationary expectations and continues to deliver the desired objective of price stability," the Monetary Policy Committee (MPC) said in a statement.

The committee, which meets every two months to set interest rates, has kept rates on hold since last July after halting an easing cycle that began in September 2012.

Kenya's economy is expected to have expanded by 5.5-6 percent last year, compared with 4.6 percent growth in 2012. It has gained momentum since a presidential election in March passed smoothly, and could gather more steam this year.

"Confidence in the economy remains strong," the MPC said, citing a stock market rally and the endorsement of the country's management of the economy last week by the International Monetary Fund.

This year's growth is expected to be driven by the financial services, manufacturing and construction sectors.

The committee said there was room for commercial banks to increase lending to the private sector even though lending accelerated in November, the latest available data, to 20 percent year-on-year from 18 percent year-on-year in October.

- Reuters


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