Monetary Policy Committee Retains Central Bank Rate At 9 Percent

The Central Bank of Kenya (CBK) through the Monetary Policy Meeting (MPC) has decided to retain the Central Bank Rate (CBR) at 9.00 percent.

According to the MPC, the inflation expectations remained well anchored within the target range, and that the economy was operating close to its potential.

The Committee also noted the prospective tightening of fiscal policy which would provide scope for accommodative monetary policy in the near term.

“The MPC concluded that the current policy stance remains appropriate, and therefore decided to retain the CBR at 9.00 percent,” read a statement from the committee.

The inflation rate fell to 5.0 percent in August from 6.3 percent in July, reflecting decreases in the prices of both vegetable and non-vegetable food crops due to improved supply.

Food inflation declined to 6.7 percent in August from 7.9 percent in July following improved weather conditions.

Non-food-non-fuel (NFNF) inflation remained below 5 percent, indicative of muted demand pressures and spillover effects of the excise tax indexation in July and the recent increase in fuel prices.

Overall inflation is expected to remain within the target range in the near term mainly due to expectations of lower food prices with the expected favorable weather conditions, and lower electricity prices reflecting the reduced usage of expensive power sources.

The recent increase in international oil prices is expected to exert moderate upward pressure on fuel prices, but with limited pass-through effects on inflation.

The foreign exchange market has remained relatively stable, supported by the narrowing of the current account deficit to 4.2 percent of GDP in the 12 months to July 2019 from 5.5 percent in July 2018.

The narrowing reflects the resilient performance of exports particularly horticulture and manufactured goods, strong diaspora remittances, higher receipts from tourism and transport services and lower imports of food and SGR-related equipment.

The current account deficit is expected to narrow to 4.5 percent of GDP in 2019 from 5.0 percent in 2018.

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