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Kenya Monetary Policy June 2020

Kenya: Central Bank stands pat in June

At its 25 June meeting, the Monetary Policy Committee (MPC) of Kenya’s Central Bank retained the Central Bank rate at 7.00%, where it has been since 29 April. The decision was largely in line with market expectations.

The decision to leave the rate unchanged largely reflected the Bank’s view that the measures taken in March and April were having the intended impact on the economy, cushioning the fallout from the coronavirus shock. These measures included axing the Central Bank rate by a total of 125 basis points and lowering the cash reserve ratio to free up extra bank lending capacity. Furthermore, in the short term, inflation is expected to remain within the target band of 2.5%–7.5% amid continued muted global oil prices, favorable weather conditions, the impact of a VAT reduction from 16% to 14% and weak demand pressures.

In terms of forward guidance, the Bank noted 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 meeting is scheduled for 29 July.

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