The Central Bank of Kenya on Wednesday said it had cut its benchmark interest rate for the fourth time in a row at a special meeting of the Monetary Policy Committee in a bid to cushion the economy from the adverse effects of the coronavirus pandemic.
The banks’ Governor Dr. Patrick Njoroge in a statement to newsrooms on Wednesday said the MPC reduced the rate to 7% from 7.25%. That brings the total easing since November to 200 basis points, with the rate now the lowest since September 2011.
The median estimate of five economists in a Bloomberg survey was for a 50 basis-point cut.
This even as the Central bank cut its 2020 growth forecast for East Africa’s largest economy to 2.3%. Expansion at 5.4% in 2019 missed government estimates. The World Bank said output could shrink 1% if the disruptions caused by the pandemic last for about three months.
The policy actions taken in March, when the MPC cut interest rates and lowered its cash-reserve ratio to free up liquidity, “are having the intended impact on the economy, and are still being transmitted,” Njoroge said.
The virus has disrupted agriculture and tourism, which are Kenya’s biggest foreign-exchange earners after remittances. The latest information shows that orders have started to return, reflecting the impact of mitigation measures put in place by the government targeted at maintaining cargo flights, the lifting of lockdown measures and easing of supply restrictions in some of the key destination markets, the central bank said.
At the same time Kenya is negotiating with the International Monetary Fund for a precautionary facility to cushion the economy against the COVID-19 shock.