Interest Rate in Kenya

Kenya Interest Rate

Central Bank pauses tightening cycle in August, meeting market expectations

At its 9 August meeting, the Monetary Policy Committee (MPC) of the Central Bank of Kenya (CBK) decided to pause its tightening cycle. As such, the CBK maintained the Central Bank Rate at 10.50%. The decision, which markets had priced in, followed the 100 basis points increase delivered at June’s unscheduled meeting.

The Bank noted that headline inflation eased to 7.3% in July. Consequently, inflation fell within the CBK’s target range of 2.5–7.5% for the first time since May 2022. Moreover, the Bank sees price pressures easing further in the near term. With regard to the economy, the MPC acknowledged that Kenyan activity had remained robust, as shown by recently released national accounts data; GDP expanded 5.3% year on year in Q1 2023. Meanwhile, the Bank assessed that the lagged effects of June’s hike were still transitioning into the economy, so it deemed a hold necessary to evaluate its impact.

In its communiqué, the Bank’s tone was largely unchanged from prior statements, and it once again avoided making explicit what its future policy moves would be. That said, it emphasized it would assess the effects of policy actions and changes in the external and domestic economic outlook. Most of our panelists see the Central Bank Rate ending the year at its current level, while a few see further hikes before the end of the year.

The next meeting is scheduled for October.