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Kenya Monetary Policy September 2019

Kenya: Central Bank stands pat in September

At its meeting on 23 September, the Monetary Policy Committee (MPC) of Kenya’s Central Bank decided to hold the central bank rate at 9.00%, where it has been since July 2018. The decision had been widely expected by market analysts.

With inflation receding in July–August and the economy operating close to its potential, the Bank opted to keep monetary policy conditions unchanged. Although food prices remained relatively high, core inflation stood below the mid-point of the 2.5%–7.5% target band suggesting that, despite robust economic activity, demand side pressures stayed muted. In addition, a favorable external backdrop has stabilized the shilling this year, further supporting the Bank’s decision to stay put.

In its forward guidance, the Bank remarked that the government’s plans to tighten fiscal policy opened a window for more accommodative monetary policy in the near-term. Inflation is expected to remain well anchored within the target range, as improved weather conditions are projected to lessen food price pressures in the near-term. However, global trade uncertainties and oil price volatility pose downside risks to the outlook and could heighten price pressures ahead.

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