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Kenya Monetary Policy May 2023

Kenya: Central Bank keeps the policy rate unchanged in May

At its 29 May meeting, the Monetary Policy Committee (MPC) of the Central Bank of Kenya decided to keep the Central Bank Rate unchanged at 9.50%, following a rate hike in March.

The decision not to hike further was motivated by the easing of headline inflation since the start of the year and the ongoing effects of past monetary tightening. The Bank expects a moderation in general food inflation ahead, given the recent rains and the allowances of duty-free imports on certain food items. That said, the Bank expected higher electricity, fuel and sugar prices to “exert moderate upward pressure on overall inflation.”

In line with its past communiqués, the Bank refrained from offering forward guidance, reiterating its commitment to monitor the impact of the policy measures and developments in the global and domestic economy. The Consensus among our analysts is that rates have now reached their peak, although easing is not expected until next year.

The next meeting is scheduled for July, but the Bank said it could meet earlier if conditions warrant.

Analysts at the EIU commented:

“The rise in the benchmark rate to 9.5% marks a possible end of the 2022-23 tightening cycle, and we expect small cuts in 2024-26, broadly in line with US trends.”

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