Kenya Maintains Key Rate at 10%


The central bank of Kenya kept its benchmark interest rate unchanged at 10 percent for the thirteenth consecutive meeting on September 18th, 2017, as widely expected. Policymakers said the decision aims to continue to anchor inflation expectations in the context of general macroeconomic stability, a prolonged election period and continuous uncertainties in the global economy.

Excerpts from the MPC Press Release:

The Monetary Policy Committee (MPC) met on September 18, 2017, to review the outcome of its policy decisions and recent economic developments. The meeting was held against a backdrop of general macroeconomic stability, a prolonged election period, and continued uncertainties in the global economy.

Month-on-month overall inflation rose to 8.0 percent in August 2017 from 7.5 percent in July 2017 reflecting limited supply of some food items, particularly tomatoes, following transport difficulties in the immediate period after the general elections. Additionally, unusual demand for some food items such as wheat flour and rice in the period before the elections resulted in a temporary shortage. Nevertheless, the contribution to overall inflation of some items such as maize grain, maize flour, milk,sugar, and Irish potatoes decreased in part due to favorable weather conditions and the positive impact of Government measures. Non-food-non-fuel (NFNF) inflation remained stable below 5 percent suggesting that demand pressures in the economy were muted. A normalization of supply, the expected short rains, and supportive measures taken by the Government are expected to further lower food prices in the near term.

The Committee reviewed the recent economic developments and noted that growth expectations remain unchanged. The stable macroeconomic environment is expected to be supported by a recovery in agriculture due to normal weather conditions, a resilient services sector, continued infrastructure development, and stability in the global economy. Spending by the National and County Governments in the near term is expected to provide an additional stimulus.

The MPC Private Sector Market Perception Survey conducted in September 2017 showed that inflation was expected to decline due to lower food prices with the expected short rains and the Government subsidies on some food items. Growth expectations by banks and non-banks remained unchanged in the September 2017 survey relative to the July 2017 survey, with banks expecting a lower growth on account of weaker private sector credit growth and concerns over the continuing election process. However, nonbank private firms expect the continued public investment in infrastructure, and favourable weather conditions during the short rains season to support growth in 2017.

Although the outlook for global growth has improved, uncertainties remain particularly with regard to U.S. economic policies, the post-Brexit resolution, and the pace of normalization of monetary policies in advanced economies.

The Committee concluded that the current policy stance remains appropriate. The MPC therefore decided to retain the Central Bank Rate (CBR) at 10.0 percent in order to continue to anchor inflation expectations. The CBK will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary.

 Kenya Maintains Key Rate at 10%


Central Bank of Kenya |Luisa Carvalho | luisa.carvalho@tradingeconomics.com
9/18/2017 2:49:42 PM