This archive report was first published on 23 September 2019.
On September 23, 2019, the Central Bank of Kenya Monetary Policy Committee made a crucial decision to retain the benchmark interest rate at 9 percent. This decision was based on the stable inflation rate, which remained within the expected band of 2.5 percent to 7.5 percent.
The committee warned of increased uncertainties in the external market, which could affect economic growth. Despite this, the decision to retain the benchmark rate is the 16th consecutive meeting, indicating a stable economic environment.
The inflation rate fell to 5.0 percent in August from 6.3 percent in July, reflecting decreases in the prices of both vegetable and non-vegetable food crops due to improved supply. Food inflation also declined to 6.7 percent in August from 7.9 percent in July, following improved weather conditions.
Non-food-non-fuel (NFNF) inflation remained below 5 percent, indicative of muted demand pressures and spillover effects of the excise tax indexation in July and recent increase in fuel prices. The expected favourable weather and lower power bills are expected to ease inflationary pressure.
Despite the national assembly discrediting the abolition of the rate cap, which has stifled credit, the Monetary Policy Committee reported that credit to the private sector grew by 6.3 percent in the 12 months to August, compared to 6.1 percent in July. This growth was attributed to trade, manufacturing, consumer durables, private households, and finance and insurance.
The ratio of gross non-performing loans (NPLs) to gross loans stood at 12.6 percent in August compared to 12.7 percent in June, as banks enhance loan recovery efforts. The foreign exchange market has also remained relatively stable, supported by the narrowing of the current account deficit to 4.2 percent of GDP in the 12 months to July.
