Kenya: Central Bank keeps rate steady
March 27, 2019
At its latest meeting held on 27 March, the Monetary Policy Committee (MPC) of Kenya’s Central Bank held its benchmark lending rate at 9.00%, where it has been July 2018. The decision to keep the rate stable was in line with market expectations.
The Bank held fire amid declining inflation, a stable shilling and sustained optimism on future economic activity. Inflation fell to 4.1% in February, from 4.7% in January, remaining within the Bank’s 2.5%–7.5%. target band. Moreover, core inflation remained below 5.0%, indicating subdued demand pressures. Inflation should remain within target in the near-term, thanks in part to sufficient agricultural output keeping food prices in check and a decline in electricity prices. Meanwhile, strong agricultural exports, strong tourism activity and resilient remittances have kept the shilling firm, buttressed further by reduced imports of food and capital goods. Despite a delay in the arrival of the rainy season, the outlook on growth remained upbeat.
Devoid of forward guidance, the Bank indicated that it would maintain its current stance against the backdrop of within-target inflation and a positive outlook on the economy’s performance. The communiqué also noted that it would continue to closely monitor domestic and global developments—especially cooling global growth economy and trade tensions—to inform the direction of future policy. While the Bank has not hinted at a change of course, FocusEconomics panelists are divided on the Bank’s stance going forward.
Author: Nihad Ahmed, Economist