CBK Retains Rates At 7% As Economy Operates Below Potential

The Central Bank of Kenya has retained the Central Bank Rate at 7 percent as it “closely monitors the impact of the policy measures, as well as developments in the global and domestic economy.

“The Committee noted that inflation expectations remained well-anchored within the target range, and the economy continued to operate below its potential level,” said CBK in a statement.

The overall inflation stood at 6.3 percent in June compared to 5.8 percent in May. The increase in the inflation rate as a result of increased prices in food rose to 8.5 percent from 7 percent. Cooking oil, beef, white bread, etc dictated the prices.

According to the Central Bank, the global economy is expected to rebound strongly in 2021 supported by the ongoing deployment of vaccines, and the relaxation of the Covid-19 containment measures. The recovery, however, remains uneven.

The foreign exchange reserves, which currently stand at one trillion shillings (about 9.35 billion U.S. dollars) which is equivalent to 5.72 months of import cover, continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.

Exports of goods from Kenya have remained growing by 11.1 percent in the first half of 2021 compared to a similar period in 2020. Horticulture and manufactured goods performed well in exports rising by 29.4 and 45.2 percent respectively. Exports of the team declined by 5.5 percent due to “accelerated purchases in 2020.”

Import goods increased by 21.9 percent in the first half of 2021compared to a similar period in 2020. This reflected the increase in imports of oil and other intermediate goods.

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