Kenya Monetary Policy November 2016

Kenya

Kenya: Central Bank keeps main policy rate at 10.00% in November

November 28, 2016

On 28 November, the Central Bank of Kenya (CBK) held its main policy rate on hold at 10.00%. The Bank had cut the interest rate at its previous meeting in September in a bid to support lending to the private sector and thus to counter the possible negative impact of the government’s decision to limit commercial banks’ interest rates.

The Bank commented that the performance of Kenya’s economy in the second quarter was strong. More recent indicators show mixed signals about growth in the second half of the year. Banks remain cautious as they continue to carefully monitor the potential impact of capping interest rates. Even though credit growth in the private sector stabilized at 4.6% in October—the slowest growth rate in several months—the available data were still inadequate to facilitate a conclusive analysis of the impact of interest rate caps on the economy in general and monetary policy in particular. The CBK also commented that its foreign exchange reserves remain high and continue to provide adequate buffers to counteract short-term shocks.

Regarding price developments, inflation remains within the Bank’s target range. The foreign exchange market remains relatively stable despite the volatility in global financial markets following the results of the U.S. elections and the seasonal increase in demand for foreign currency. The FX market is supported by the gradual narrowing of the current account deficit due to strong remittances and lower imports of machinery and equipment.

FocusEconomics Consensus Forecast panelists expect the Bank Rate to end 2017 at 9.75%. For 2018, panelists project that the Bank Rate will be cut further to 9.25%.


Author:, Senior Economist

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Kenya Monetary Policy November 2016

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


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