Kenya Leaves Benchmark Interest Rate at 11.5%


Central Bank of Kenya held its benchmark interest rate unchanged at 11.5 percent at its March 21st 2016 meeting, saying current monetary policy had helped to moderate inflation expectations.

Excerpts from the statement by the Central Bank of Kenya:

Month-on-month overall inflation fell to 6.8 percent in February 2016, from 7.8 percent in January, thereby returning to within the Government’s target range of 2.5 to 7.5 percent. This decline was largely driven by food and fuel prices. The non-food-non-fuel (NFNF) inflation rose to 5.9 percent from 5.5 percent, reflecting the revised excise tax on alcoholic beverages and tobacco products, implemented in December 2015.

The foreign exchange market has remained stable even as the global markets were volatile due to pressures from China’s financial markets, and uncertainties in the advanced economies. Developments in the foreign exchange market are supported by a narrowing current account deficit with improved exports, strong diaspora remittances, and a lower oil import bill. CBK’s foreign exchange reserves currently stand at USD7,379.3 million (equivalent to 4.7 months of import cover). The approval on March 14 of new IMF Precautionary Arrangements amounting to USD1.5 billion (SDR1.06 billion) covering 2 years, reflects confidence in the country’s macroeconomic policies and provides additional buffers against short-term shocks.

The revised Budget Estimates of the National Government, currently before the National Assembly, indicate a planned reduction in Government expenditures which should continue to ease pressures on domestic borrowing and interest rates.

The banking sector remains stable and resilient. However, the CBK continues to closely monitor the sector, particularly concerning credit risk as reflected in an increase in non-performing loans. Liquidity in banks and its distribution has normalised, but further work is needed to strengthen liquidity management and operations of the interbank market. Average commercial banks’ lending rates declined to 17.9 percent in February 2016, from 18.3 percent in December 2015.


The CBK continues to urge banks to reduce their operating costs and enhance transparency in the pricing of credit. The Committee noted that the monetary policy measures currently in place have continued to moderate inflation expectations. The MPC decided to retain the CBR at its current level of 11.5 percent, to continue to anchor inflation expectations and enhance the credibility of its policy stance. The CBK will continue to monitor developments and will use the instruments at its disposal to maintain overall price and financial sector stability.

Kenya Leaves Benchmark Interest Rate at 11.5%


Central Bank of Kenya | Mojdeh Kazemi | mojdeh@tradingeconomics.com
3/21/2016 4:27:32 PM