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Kenya Monetary Policy July 2019

Kenya: Central Bank holds rates steady in July

At its meeting on 24 July, the Monetary Policy Committee (MPC) of Kenya’s Central Bank decided to hold the central bank rate stable at 9.00%, where it has been since July 2018. The decision was widely expected by market analysts.

With inflation receding in May–June from April’s surge, the Bank opted to keep monetary policy conditions unchanged. Although food prices remained relatively high, core inflation stood below the mid-point of the 2.5%–7.5% target band suggesting that, despite robust economic activity, demand side pressures stayed muted. In addition, a favorable external backdrop has underpinned the stronger shilling this year, further supporting the Bank’s decision to stay pat.

In its forward guidance, the Bank remarked that inflation should remain “well anchored within the target range”, as improved weather conditions are expected to lower food price pressures in the near-term. Moreover, with the economy projected to continue operating close to full capacity thanks to upbeat public investment and improved agricultural output, there is no immediate need for monetary stimulus. However, slower global growth and oil price volatility pose downside risks to the outlook and could heighten price pressures ahead.

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