Monetary Policy Committee Retains CBR at 9.00 Percent

The Monetary Policy Committee (MPC) has retained the Central Bank Rate (CBR) at 9.00 percent attributing it to inflation expectations that “remained well-anchored within the range.”

The Committee met against the backdrop of domestic macroeconomic stability, sustained optimism on the economic growth prospects and improving weather conditions in most parts of the country.

The inflation rate for the month of April stood at 6.6 percent compared to 4.4 percent recorded in March. The spike in inflation rate was attributed to increasing food prices due to the depressed supply of vegetables and other fast-growing food crops.

Food inflation in April rose to 7.7 percent from 2.9 percent in March. Non-food and non-fuel inflation, however, remained below 5 percent. According to MPC, the inflation rate is expected to remain within the target range in the near term.

Kenya’s foreign exchange market has remained stable supported by the narrowing of the current account deficit to 4.5 percent of the country’s gross domestic product (GDP) in a period of 12 months to April 2019.

The current account deficit is expected to grow to 4.8 percent of GDP in 2019 from 5.0 percent recorded in 2018.

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The MPC also based its decision on the successful issuance of the 210 billion shilling Eurobond by the government during the month. The performance of the bond was quoted at 452 percent with this “reaffirming investors’ confidence in Kenya’s economy.”

The private sector, according to MPC, grew by 4.9 percent in the 12-month period to April, compared to 4.3 percent in March. The manufacturing sector is said to have grown by 7.9 percent, trade by 8.4 percent, finance, and insurance by 13.3 percent, and consumer durables by 16.4 percent.

Average commercial bank’s liquidity and capital adequacy ratios stood at 51.0 percent and 18.3 percent respectively in the month of April. The ratio is gross non-performing loans (NPLs) to gross loans stood at 12.9 percent in April compared to 12.8 percent in February.

“The committee noted that inflation expectations remained well anchored within the target range, but there is need to remain vigilant on possible spillovers of recent food and fuel price increases,” said the committee in a statement.