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Kenya Monetary Policy January 2022

Kenya: Central Bank stands pat in January

The Monetary Policy Committee of the Central Bank of Kenya stood pat at its 26 January meeting, leaving the Central Bank Rate unchanged at 7.00%. This marked the twelfth consecutive hold, which was in line with market analysts’ expectations.

The decision to hold fire was driven by well-anchored inflation expectations as the Bank noted that “inflation is expected to remain within the target range in the near term, with muted demand pressures and the impact of Government measures to lower electricity tariffs and stabilize fuel prices.” Regarding the economy, the monetary policy authority stated that it expects the strong recovery of 2021 to carry over into this year, on the back of a continued strong performance in the services sector and a recovery in the agricultural sector. Moreover, the Bank expressed that “leading economic indicators showed continued robust performance”. That said, the Bank noted that elevated risks to inflation remain, with the potential to impact the domestic economy.

Although the Bank’s statement lacked clear forward guidance in terms of future policy rate decisions, it reiterated its commitment to “closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and [that it] stands ready to take additional measures as necessary.” Looking ahead, panelists expect, on average, that the Bank will commence a tightening cycle this year to ensure inflation remains within its informal 2.5%–7.5% target range amid a continued economic recovery.

The next meeting is scheduled to take place in March.

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