NAIROBI, May 7 (Reuters) - Kenya's central bank cut its benchmark lending rate by 100 basis points to 8.5 percent, resuming an easing path after pausing during the elections in March.
In a Reuters poll of 13 analysts eight had forecast the bank would leave rates on hold, citing an upside risk to inflation due to higher food prices. Five forecast a cut.
'They are saying the key now is growth and they are not worried that much about inflation,' said Ignatius Chicha, head of markets at Citibank Kenya.
The Monetary Policy Committee said in a statement that confidence in the economy had increased after the vote passed off peacefully, sending the stock market higher, amid resilient hard currency inflows from Kenyans living abroad.
It said persistent worries about strains in the euro zone and a current account deficit of 11.4 percent of gross domestic product, were threats to the economy but said there was 'policy space to encourage the private sector' to support growth.
Among positive economic factors, it cited projected growth in key regional trading partners, a stable exchange rate outlook due to capital inflows and good rains that support a low and stable food inflation over the short term.
(Reporting by Duncan Miriri and Kevin Mwanza; Editing by Edmund Blair, Ron Askew) Keywords: KENYA RATES/
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