Kenya’s Central Bank keeps benchmark lending rate unchanged

Kenya’s Central Bank recently announced that it would be keeping its benchmark lending rate stable at 10.5 per cent. This decision is expected to have significant implications on private sector credit demand in the region. To shed more light on this development and provide insights on market trends in East Africa, Phillip Ssali, the Head of Corporate Sales & Global Markets at Standard Bank Group, joined CNBC Africa for a live interview. During the discussion, Ssali highlighted various key points that are crucial for understanding the current economic landscape in Kenya and Uganda. One of the main takeaways from the interview was the positive outlook on inflation in East Africa. Both Kenya and Uganda have experienced a decline in inflation rates, showcasing a positive trajectory for the economies in the region. For Kenya, inflation decreased from 7.9 to 7.3 percent in July, while Uganda saw a decline from 4.9 to 3.9 percent during the same period. This trend is a clear indicator that inflation is being contained, which is good news for the overall economic stability in the region. Ssali also delved into the topic of credit growth and its potential impact on the economy. He mentioned that credit growth in Uganda and Kenya had been moderate recently due to factors such as consumer confidence and the cost of credit. However, with the Central Bank of Uganda cutting its interest rates by 50 basis points to stimulate credit growth, there is optimism that credit rates will trend lower in the medium term. Additionally, Kenya's plan to reduce domestic borrowing and seek external lenders is expected to lower interest rates, thereby fostering an environment conducive to private sector credit growth. Another crucial point discussed in the interview was the implications on the currency market following the Central Bank's decision. Ssali mentioned that while increased private sector credit growth could potentially lead to demand-driven import growth, improving investor confidence and economic activity could offset the pressure on the local currency. The analysis provided a nuanced view of how different factors could influence currency movements in Kenya and Uganda. Furthermore, the interview touched upon the significance of financial inclusion, particularly in Kenya, where the Central Bank approved mobile money giant Safaricom to transact up to half a million shillings. This move is expected to deepen financial inclusion and expand access to financial services, especially through platforms like M-Pesa, which have been instrumental in driving economic activity in the region. Ssali emphasized that this development could significantly boost economic growth by ensuring broader access to financial services. In conclusion, the interview with Phillip Ssali provided valuable insights into the economic landscape of Kenya and Uganda. The stability of interest rates, the focus on stimulating credit growth, and the emphasis on financial inclusion are all key aspects shaping the future direction of the economies in East Africa. As the region continues to navigate challenges and opportunities, these strategic decisions by the Central Banks and regulatory authorities play a crucial role in driving sustainable economic growth and development.