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UPDATE 1-Kenya central bank keeps benchmark rate at 10 percent
May 29, 2017 / 2:35 PM / in 3 months

UPDATE 1-Kenya central bank keeps benchmark rate at 10 percent

(Adds details, background)

By George Obulutsa

NAIROBI, May 29 (Reuters) - Kenya's central bank kept its benchmark lending rate at 10.0 percent on Monday, the bank's monetary policy committee said, a bid to reduce the threat of demand-driven inflation.

Analysts polled by Reuters had predicted rates wouldn't change. The government, which faces parliamentary, presidential and local elections in August, is struggling to contain high inflation, caused mostly by higher food prices.

Kenya's inflation rose to an annual 11.48 percent in April, up from 10.28 percent in March and the highest since May 2012.

The government aims to contain inflation within a band of 2.5 to 7.5 percent.

"The committee concluded that overall inflation is expected to remain above the government target range in the near term due to elevated prices for some food items," the central bank said in a statement. "Nevertheless, the prevailing policy stance had reduced the threat of demand-driven inflation."

Kenya's government capped lending rates last September at 4 percentage points above the central bank rate, saying they were too high and banks had repeatedly failed to lower them.

The central bank said that as a result of the caps, the number of loan applications had increased by 23.4 percent between August 2016 and April. The value of the loans applied for fell by 18.3 percent.

Loan approvals increased by 35.7 percent, the bank said. The value of the loans approved rose 16.3 percent.

Kenya predicts its economy will grow 5.9 percent this year, up from 5.8 percent in 2016. (Reporting by George Obulutsa; editing by Larry King)

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