Equity Bank on Monday, February 19, increased its base lending rates from 17.56% to 18.24%.
In a statement written to its members, Equity Bank said that all loans will from February 20 come with a rate of 18.24%.
The change, Equity noted, is in response to the move by the Central Bank of Kenya (CBK) to increase its lending rates to commercial banks with the latest one coming in February when it adjusted the rates from 12.5% to 13%.
“Following the adjustment of the Central Bank Rate (CBR) from 10.5% to 12.5% in December 2023 and from 12.5% to 13% in February 2024, Equity Bank wishes to notify our customers and the general public, that the Bank shall, effective 20th February 2024, adjust Equity Bank’s Reference Rate (EBRR) from the current 17.56% to 18.24%,” the bank announced.
Following the adjustment, the final Interest Rate shall be Equity Bank’s Reference Rate (18.24%) plus a Margin (currently at a maximum of 8.5%) per annum. However, the rates will only apply to loans given in Kenyan Shillings.
CBK had previously adjusted its lending rates in December 2023 from 10.5% to 12.5%. During its monthly meeting held on Tuesday 6th February 2024, the CBK Monetary Policy Committee (MPC) resolved to increase the Central Bank Rate (CBR) to 13% which was the highest experienced in 12 years.
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Why CBK raised lending rates
The MPC cited concerns about inflation in the country, noting that overall inflation had remained sticky in the upper band of the target range. According to findings by the Committee, all key components of inflation – fuel, food and non-fuel non-food had increased in January.
In addition, the MPC was also cautious about continued pressures on the exchange rate and therefore concluded that further action was needed to stabilize prices.
This is despite the recent fluctuations in the foreign exchange rates over the past few days where the Kenyan Shilling gained significantly against the United States dollar and other currencies.
In its report, the Monetary Policy Committee reported that inflation had shot up to 6.9%, which was way above CBK’s target of lowering the inflation rate to region of 5.0%.
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“The proposed action will ensure that inflationary expectations remain anchored, while setting inflation on a firm downward path towards the 5.0 percent mid-point of the target range, as well as addressing residual pressures on the exchange rate,” CBK noted in its monthly report.
