Excerpt from the statement by the Central Bank of Kenya:
The Committee noted that inflation had stabilized within the Government medium-term target of 5 percent while exchange rate stability was sustained. Specifically, the Committee observed and analyzed the following positive outcomes in the market since its last meeting:
Both overall and non-food-non-fuel month-on-month inflation measures remained within the Government medium-term target in January and February 2013.
The exchange rate remained stable; it fluctuated within a narrower range of between Ksh.86.24 and Ksh.87.63 for the US Dollar in February 2013 compared with a range of between Ksh.86.08 and Ksh.87.61 in January 2013.
The Government fiscal operations in the fiscal year 2012/13 are consistent with the monetary policy objectives.
Liquidity conditions at the end of February 2013 led to short-term interest rates remaining stable around the Central Bank Rate (CBR). Private sector credit growth maintained its upward trend supported by the improved liquidity conditions and declining average lending interest rates. This was consistent with monetary easing strategy adopted by the MPC.
The data presented and the stress tests conducted on commercial banks indicated that the banking sector remains solvent and resilient.
The Committee noted that confidence in the economy has been maintained.
The Committee expected that the recent elections will enhance confidence, giving rise to optimism and a revision of portfolios towards long-term investments.
Despite the above positive developments, the Committee noted that there were risks to the macroeconomic outlook. These are attributed to the renewed upward drift in international oil prices and a weak outlook for the global economy with the expectation of a more pronounced recession in the eurozone and a slow recovery of the US economy. This outlook, coupled with the persistent balance of payments pressures due to the high current account deficit remain a threat to the general stability of prices.
Given the above considerations, and the need to provide time for previous Monetary Policy Comittee decisions to work through the economy, the Committee decided to retain the Central Bank Rate at 9.50 percent.