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Kenya Monetary Policy September 2020

Kenya: Central Bank keeps rates stable in September

At its 29 September meeting, the Monetary Policy Committee of Kenya’s Central Bank decided to maintain the Central Bank rate unchanged at 7.00%, where it has been since 29 April. The decision was largely in line with expectations.

The Central Bank decided to maintain its monetary policy stance stable in September, despite the still highly uncertain outlook due to the spread of the Covid-19 pandemic. The decision was made based on the Bank’s good assessment of the performance of the policy package until now: “the package of policy measures implemented since March were having the intended effect on the economy, and will be augmented by the implementation of the fiscal measures in the FY2020/21 Budget”. Moreover, indicators suggest that the economy started to recover in Q3, as exports remained robust, agricultural production was strong and hotels reported a recovery in the tourism sector.

In terms of future policy moves, the Bank noted that it “stands ready to take additional measures as necessary”. Consequently, the Bank’s tone suggests that a return to monetary policy easing in the remainder of the year will strongly depend on the effect of the policy measures adopted so far, and on developments in the domestic and global economies. Inflation was stable at 4.4% in July and August, and is seen remaining within the 2.5%–7.5% target range in the short term, due to lower food prices, a VAT reduction and subdued demand pressures. As such, the Bank should have the space to further cut rates, if required.

The next meeting is scheduled to take place in November.

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