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Kenya cuts lending rate by 11%

Nov 07 2012 15:16 Reuters

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Nairobi - Kenya’s central bank cut its benchmark lending rate by two percentage points on Wednesday as expected to 11%, saying inflation had fallen to within the target, creating room for gradual easing without upsetting macroeconomic stability.

The bank’s Monetary Policy Committee (MPC) said inflation, which fell to 4.14% last month, was within the government’s target, adding that credit to the private sector was also growing in line with the set target.

But the economy still faced risks mainly from volatile international oil prices, the effects of the global economic slowdown and balance of payments pressure from a high current account deficit, the MPC said in a statement.

Market participants said the shilling could recover some of the ground it had lost in the run-up to the rate decision.

“We might see a bit of correction on the shilling as it recovers from the dip we saw as some people front ran the decision by buying dollars,” said Ignatius Chicha, head of markets at CitiBank Kenya.

A Reuters poll of 12 analysts had forecast a cut of 200 basis points, to lower lending costs and give the economy a vital boost.
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