Kenya Leaves Monetary Policy Unchanged


The central bank of Kenya left its benchmark interest rate on hold at 10 percent at its March 27th 2017 meeting, in line with market expectations. Policymakers expect the inflation rate to remain above the government's target band of 2.5-7.5 percent due to food prices. Yet, consumer prices increased 9.04 percent year-on-year in February, the most since June of 2012.

Excerpts from the statement by the Central Bank of Kenya:

Overall inflation rose to 9.0 percent in February from 7.0 percent in January 2017, almost entirely due to increases in food prices. Food prices are expected to remain elevated in March and April due to the dry weather conditions, but ease with the long rains.

The foreign exchange market has remained stable. This has been supported by a narrower current account deficit mainly due to lower imports of petroleum products, machinery and transport equipment.

The banking sector remains resilient. However, the ratio of gross non-performing loans to gross loans increased to 9.7 percent in February 2017, largely due to tighter credit standards and slower credit growth.

The MPC Market Perception Survey conducted in March 2017 showed that private sector respondents expect a decline of growth in 2017, on account of the prevailing drought conditions and slowdown in private sector credit growth. However, the respondents expect the ongoing public investment in infrastructure to continue to be supportive growth.

The Committee concluded that overall inflation is expected to remain outside the Government target range in the near term due to the elevated food prices, even as demand pressures remain subdued. The Committee remains concerned about the prevailing uncertainties, including the impact of the interest rate caps on the effectiveness of monetary policy. 

Kenya Leaves Monetary Policy Unchanged


Central Bank of Kenya | Deborah Neves | deborah.neves@tradingeconomics.com
3/27/2017 4:44:13 PM