Excerpts from the statement by the Central Bank of Kenya:
Overall inflation increased to 6.7 percent in October 2015, from 6.0 percent in September, but remained within the Government target range. Month-on-month non-food-non-fuel (NFNF) inflation rose marginally to 4.8 percent in October from 4.7 percent in September. The rise in inflation was largely due to increases in the prices of some food items, and a significant base effect. However, the 3-month annualised NFNF inflation declined to 2.5 percent in October from 3.4 percent in September, indicating moderating demand pressure due to the impact of the monetary policy measures.
The foreign exchange market has been stable since September supported by CBK’s monetary policy operations. Furthermore, the current account deficit narrowed, mainly due to a lower oil import bill, and a slowdown in consumer imports. Diaspora remittances remain strong.
The CBK’s Market Perceptions Survey of November 2015 showed that private sector firms expect growth to be resilient in 2015 and to pick up in 2016 supported mainly by infrastructure investments. The Survey also showed that inflation expectations are moderating supported by lower oil and food prices. However, respondents flagged a rise in U.S. interest rates as a risk to the inflation outlook through its impact on the exchange rate. In addition, the El Niño rains remain a threat to stability of food prices if it disrupts the food supply chains.
Committee concluded that the monetary policy measures in place are appropriate to maintain market stability and anchor inflation expectations. The MPC therefore decided to retain the CBR at 11.50 percent. The CBK will continue to use the instruments at its disposal to maintain overall price and financial sector stability.