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Kenya Monetary Policy May 2020

Kenya: Central Bank leaves rate unchanged in May

At its 27 May meeting, the Monetary Policy Committee (MPC) of Kenya’s Central Bank left the Central Bank rate unchanged at 7.00%, where it has been since 29 April. The decision had been largely expected by market analysts.

The Central Bank stood pat as it deemed the measures taken in the previous meetings in March and April sufficient to cushion the economy from fallout from Covid-19, stressing they were “having the intended effect on the economy”. These measures included cutting rates by a total of 125 basis points and reducing the cash reserve ratio to free up extra bank lending capacity.

Meanwhile, inflation is projected to remain within the target range of 2.5%–7.5% in the short term due to favorable weather improving food supply, continued low global oil prices, the effect of a VAT reduction from 16% to 14% and subdued demand pressures.

Looking ahead, the Bank stated in its communiqué that it will continue to keep a close track of “the impact of the policy measures so far, as well as developments in the global and domestic economy” and stated that it stands ready to take any further measures, should they be necessary.

The MPC decided to reconvene within a month’s time.

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