The Monetary Policy Committee (MPC) under the Central Bank of Kenya (CBK) met on Wednesday and decided to retain the Central Bank Rate (CBR) at 7.00 percent amid the rising cases of Covid-19 that are hitting hard on the economy.
The Committee noted that the policy measures adopted in March and April were having the intended effect on the economy, and are still being transmitted although Kenyans claim not having felt any effects.
The MPC concluded that the current accommodation monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 7.00 percent.
“The MPC will continue to closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary. In this regard, the Committee decided to reconvene within a month,” said Dr. Patrick Njoroge, the Chair of MPC and Governor for Central Bank.
The global economic outlook in 2020 has deteriorated further and remains highly uncertain. GDP across the advanced economies contracted sharply in the first quarter, mainly reflecting widespread business closures, severe disruptions to trade and supply chains, and the collapse in global travel.
The growth is expected to worsen further in the second quarter, with the imposition of more stringent containment measures.
Several countries have commenced limited and cautious reopening of their economies, but risks remain elevated on a possible resurgence of the pandemic.
Additionally, the re-emergence of US-China trade tensions portends a significant risk to the recovery of the global economy.
In contrast, leading indicators of the Kenyan economy point to relatively strong GDP growth in the first quarter of 2020. Nevertheless, growth is expected to weaken in the second quarter, due to the adverse impact of the containment measures, particularly in transport and storage, trade and accommodation and restaurants. As a result, real GDP growth in 2020 could slow to about 2.3 percent from 5.4 percent in 2020.