Kenya: Central Bank cuts rate to further cushion economy
At its 29 April meeting, the Monetary Policy Committee (MPC) of Kenya’s Central Bank cut the Central Bank rate by 25 basis points to 7.00%—the lowest point since September 2011. The decision fell short of market expectations, which had projected a larger cut.
The MPC opted for a further rate cut in a bid to mitigate the fallout from the ongoing Covid-19 pandemic. While the Bank noted that the measures taken in the previous meeting, which included a rate cut and reducing the cash reserve ratio to free up extra bank lending capacity, were “having the intended effect on the economy”, the Bank lowered its growth expectations for 2020 to 2.3%. Meanwhile, inflation is seen remaining within the target range of 2.5%–7.5% in the short term amid favorable weather conditions, continued low global oil prices and a reduction in the VAT from 16% to 14%.
Looking ahead, the Bank stated in its communiqué that it will continue to keep a close track of “developments in the global and domestic economy” and stated that it stands ready to take any further measures, should they be necessary.
The next monetary policy meeting is scheduled for this month.