The Monetary Policy Committee (MPC) is set to meet on Tuesday, 28th
The Monetary Policy Committee (MPC) is set to meet on Tuesday, 28th September to review the outcome and effectiveness of its previous policy decisions and recent economic developments.
The MPC will then decide on the direction of the Central Bank Rate (CBR) and any other policy measure like the Cash Reserve Ratio (CRR).
In their previous meeting held on 28th July 2021, the committee maintained the CBR at 7.00 percent citing that the accommodative policy stance adopted in March 2020 and all other sittings ever since, remained appropriate and were having the desired effects on the economy.
“We expect the MPC to maintain the Central Bank Rate (CBR) at 7.00 percent and to closely monitor the rising inflation rates,” said Cytonn Investments.
Factors that will determine the CBR will be:
Inflation remaining within the government’s target range of 2.5% – 7.5%. August’s inflation stood at 6.6%, the highest reading since the pandemic began. With the possibility of further fuel price increases, we might see an even higher inflation figure in the coming months as the cost of living remains elevated.,
The need to support the economy and credit growth in the private sector. The current macro and business environment fundamentals might constrain the transmission of further easing, despite the need to stimulate economic growth. Kenya’s private sector credit growth in July 2021 stood at 7.7%, below CBK’s target of 10.2% by December 2021, an indication of the cautious lending by banks towards the Private Sector.
The need to refine macroeconomic modeling and forecasting frameworks to reflect the economy’s changing structure. Similar measures include improving the interbank market’s functioning to strengthen monetary policy transmission and operations and improving public understanding of monetary policy decisions. We expect this to support better anchoring of inflation expectations in view of the changing economic and financial environment.
The shilling has remained range-bound and therefore the need to ensure that the shilling is balanced and there is no significant pressure on it is key.