Kenya Monetary Policy March 2016


Kenya: Central Bank holds interest rate at 11.50% in March

March 22, 2016

At its second meeting of this year, on 21 March, the Central Bank of Kenya (CBK) decided to hold the Central Bank Rate (CBR) at 11.50%, where it has been resting since last July. The Central Bank stated that it kept the rate at the current level in order to, “review market developments and the impact of its previous monetary policy decisions.” Moreover, the Bank sees the rate adequate to anchor inflation expectations.

The CBK stated that inflation dropped and returned within the Bank’s target range in February, mainly due to lower food prices. The Bank added that the Kenyan shilling had been broadly stable, despite volatility in global markets, as the currency is supported by a decreasing current account deficit, solid remittances inflows and a reduced oil import bill. The Bank highlighted the increase of its foreign reserves to 4.7 months of import cover and the fact that the country secured a new USD 1.5 billion precautionary arrangement with the IMF in March as further positive developments. Moreover, the CBK stated that the banking sector remained stable, while recent surveys point to continued optimism in Kenya’s private sector. According to the Bank, the weakening global economic outlook will only have a limited impact on Kenya’s economy, thanks to its degree of diversification and financial stability.

FocusEconomics Consensus Forecast panelists expect the Bank Rate to end 2016 at 11.06%. For 2017, panelists project the Bank Rate to decrease to 10.57%.

Author: Teresa Kersting, Economist

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Kenya Monetary Policy Chart

Kenya Monetary Policy March 2016

Note: Central Bank Rate in %.
Source: Central Bank of Kenya.

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