Kenya Monetary Policy May 2018

Kenya

Kenya: Central Bank keeps rate on hold in May

May 28, 2018

At its latest meeting held on 28 May, the Central Bank of Kenya’s Monetary Policy Committee (MPC) kept the key rate at 9.50%, following a rate cut by 50 basis points at its previous meeting on 19 March. The Bank’s decision to keep the Central Bank Rate (CBR) on hold came against the backdrop of subdued inflation and more upbeat economic prospects.

With the political scene returning to stability after a prolonged election cycle and weather conditions improving, economic activity has picked up pace; the PMI climbed to the highest reading in 28 months in April, marking four consecutive months of an accelerated increase in private sector activity. A more rapid rate of expansion in private credit has also helped drive the upturn. That said, the cap on commercial bank lending rates, the timing of the removal of which is still uncertain, continues to restrain growth. Despite more buoyant conditions in the domestic economy, inflation has been on a downward trend since February and fell to 3.7% in April (March: 4.2%). April’s drop was largely due to lower food prices, which offset higher domestic energy prices emanating from rising global oil prices. Inflation expectations are also well anchored within the Bank’s 2.5%–7.5% target range.

While the Bank noted there was more room for accommodative monetary policy, with economic output remaining below its potential level and inflation falling, it assessed that the reduction of the rate in the previous meeting has yet to be fully transmitted to the economy. Furthermore, the Bank also noted it still needed to determine any potential negative impacts arising from the policy change. The MPC stated that it will continue to monitor developments in the global and domestic economy, including the rise in international oil prices, the pace of monetary policy normalization in advanced economies, and the looming trade war. The date of the next monetary policy meeting has yet to be decided.

FocusEconomics Consensus Forecast panelists expect the Bank Rate to end 2018 at 8.92%. For 2019, panelists project that the Bank Rate will be reduced to 8.60% by the end of the year.


Author:, Economist

Sample Report

Looking for forecasts related to Monetary Policy in Kenya? Download a sample report now.

Download

Kenya Monetary Policy Chart


Kenya Monetary Policy May 2018 1

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


Kenya Economic News

  • Kenya: PMI ticks up in December

    January 6, 2020

    The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—came in at 53.3 in December, up from November’s 53.2 reading and thus climbing further above the 50-threshold that indicates an improvement in business conditions. New orders rose sharply in December amid increased referrals from clients as did new export orders on stronger demand from European markets.

    Read more

  • Kenya: Growth slows to two-year low in Q3

    December 31, 2019

    Year-on-year growth slowed to 5.1% in the third quarter of 2019, down from the second quarter’s 5.6% and marking the lowest reading since Q3 2017, according to Kenya’s Statistical Institute (KNBS). The third-quarter moderation largely reflected a broad-based slowdown in activity across all sectors.

    Read more

  • Kenya: Inflation rises to eight-month high in December

    December 31, 2019

    Consumer prices rose 0.90% over the previous month in December, up from November’s 0.41% increase and marking the highest reading since April.

    Read more

  • Kenya: PMI stable in November

    December 4, 2019

    The Purchasing Managers’ Index (PMI)—produced by IHS Markit and Stanbic Bank—came in at 53.2 in November, matching October’s reading, thus staying above the critical 50-threshold that separates expansion from contraction and signaling a healthy rate of growth in activity.

    Read more

  • Kenya: Inflation rises in November

    November 30, 2019

    Consumer prices rose 0.41% over the previous month in November, up from October’s 0.28% increase.

    Read more

More news

Search form