Kenya Keeps Interest Rate Steady at 10%


The central bank of Kenya kept its benchmark interest rate unchanged at 10 percent for the eighth consecutive meeting on January 22nd 2018, as widely expected. The Committee said the decision aims to anchor inflation expectations in the context of sustained macroeconomic stability, increased optimism on growth prospects, improving business environment, and continued strengthening of the global economy.

Excerpts from the MPC Press Release:

Month-on-month overall inflation fell to 4.5 percent in December 2017 from 4.7 percent in November 2017, thereby remaining within the Government target range. This decline was due to lower food prices reflecting improved supply of key food items, particularly cabbages, Irish potatoes, tomatoes, sugar, and maize flour. The decrease in food prices outweighed the increase in fuel and electricity prices, and the rise in transport costs during the festive period. Non-food-non-fuel (NFNF) inflation remained below 5 percent demonstrating that demand driven inflationary pressures remained muted. Although the rise in international oil prices is expected to exert moderate upward pressure, overall inflation is expected to remain well anchored and within the Government target range in the near term.

The MPC Private Sector Market Perception Survey conducted in January 2018 showed an upsurge in optimism by the private sector for the economic prospects in 2018. More than 90 percent of the respondents were optimistic about prospects for 2018, compared to 65 percent in November 2017. These respondents attributed their optimism to a stable macroeconomic environment, improved business environment and investor confidence, continued public investment in infrastructure, and expected commencement of direct flights to the U.S.

The MPC noted increased optimism for growth prospects in the economy and that inflation expectations are well anchored within the Government target range. The Committee noted that there was some room for accommodative monetary policy in the near term, as well as the risk of perverse outcomes. It concluded that there was need to further monitor and assess the impact of its policy actions. The MPC therefore decided to retain the Central Bank Rate (CBR) at 10.0 percent. The Committee continues to monitor the impact of the interest rate caps on the effective transmission of monetary policy. The CBK will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary.

Kenya Keeps Interest Rate Steady at 10%


Central Bank of Kenya | Stefanie Moya | stefanie.moya@tradingeconomics.com
1/22/2018 2:16:06 PM