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Kenya's central bank cuts benchmark rate to boost 'below-potential' growth

The Central Bank of Kenya lowered its benchmark rate July 30, saying the country's economy was still growing below its potential while inflation expectations were anchored within the target range.

The bank's monetary policy committee trimmed the central bank rate to 9.00% from 9.50%, noting that "economic output was below its potential level, and there was some room for further accommodative monetary policy".

Real GDP growth was 5.7% in the first quarter, the bank said, faster than the 4.8% expansion in the year-ago quarter. Meanwhile, private-sector credit rose 4.3% in the 12 months to June, compared to 2.8% in April.

Inflation accelerated to 4.3% in June from 4.0% in May due to higher energy prices, according to the bank. Excluding food and fuel, inflation remained below 5%.

Overall inflation is expected to remain within the target range mainly due to lower food prices reflecting favorable weather conditions but higher domestic fuel prices due to the recent increase in international oil prices and recent tax measures are expect to push prices up in the near term.