The Central Bank of Kenya’s Monetary Policy Meeting (MPC) has lowered the Central Bank Rate (CBR) to a 9-year low of 8.25 percent on account that the economy of Kenya continued to operate below its potential level.
“The MPC, therefore, decided to lower the CBR from 8.50 to 8.25 percent. The Committee will closely the impact of this change to its policy stance. The MPC will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures,” said the Committee.
According to MPC, the month-on-month overall inflation remained within the target range in November and December 2019. The inflation rate stood at 5.8 percent in December 2019 compared to 5.6 percent in November 2019, mainly reflecting on the temporary effects of the increase in food prices and transport costs.
The CBK says that the foreign exchange market has remained stable, supported by the narrowing of the current deficit as well as balanced flows. The current account deficit narrowed to an estimated 4.6 percent of the GDP in 2019 from 5.0 percent of the GDP in 2018.
Press release: Monetary Policy Committee meeting. pic.twitter.com/Kh5Vu2Eo5M
— Central Bank of Kenya (@CBKKenya) January 27, 2020
The CBK foreign exchange reserves, which currently stand at 8,475 million US Dollars, an equivalent of 5.2 months of import cover, continue to adequately provide cover and a buffer against short-term shocks in the foreign exchange market.
“The economy of Kenya remained resilient with data for the third quarter of 2019 showing that the real GDP grew by 5.4 percent in the first three quarters. This growth was supported by macroeconomic stability, growth of MSMEs, and robust service sector particularly accommodation and restaurant, information and communications technology, and transport and storage.”
According to data from CBK, the private sector credit grew by 7.1 percent in the 12 months to December 2019. The manufacturing sector grew 9.2 percent, trade 8.9 percent, transport and communication 8.1 percent, and consumer durables by 8.9 percent.
“Growth in private sector credit, particularly to Micro, Small and Medium-sized Enterprises, is expected to increase gradually due to the deployment of innovative MSME credit products, the repeal of the rate caps and the continued easing of credit risk.”