Central Bank of Kenya (CBK) on Monday maintained the benchmark rate at 10 per cent for the 12th straight month. The move came amid suggestions that the cap on interest rates may be repealed. Bank Governor Patrick Njoroge, who chairs the Monetary Policy Committee, said the move was informed by easing inflation, a stable foreign exchange market and a resilient banking sector.
CBK said month on month overall inflation rose to 8.0 percent in August 2017 from 7.5 percent in July 2017, reflecting limited supply of some food items,, particularly tomatoes, following transport difficulties in the immediate period after the general elections.
“Market Perception Survey conducted in September 2017 showed that inflation was expected to decline due to lower food prices with the expected short rains and the Government subsidies on some food items,” Njoroge said.
He added that growth expectations by banks and non-banks remained unchanged in the September 2017 survey relative to the July 2017 survey, with banks expecting a lower growth on account of weaker private sector credit growth and concerns over the continuing election process.
“However, non-bank private firms expect the continued public investment in infrastructure, and favourable weather conditions during the short rains season to support growth in 2017,” he said, adding that although the outlook for global growth has improved, uncertainties remain particularly with regard to U.S. economic policies, the post-Brexit resolution, and the pace of normalization of monetary policies in advanced economies.
“The MPC therefore decided to retain the Central Bank Rate (CBR) at 10.0 percent in order to continue to anchor inflation expectations. The CBK will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary,” Njoroge said.