This archive report was first published on 23 September 2019.
On September 23, 2019, the Central Bank of Kenya (CBK) maintained the base lending rate at 9% for the 16th consecutive month, a move attributed to stability in core consumer prices amidst ongoing global turbulence.
According to the CBK, the Monetary Policy Committee (MPC) private sector market perception survey conducted in September indicates that inflation expectations remain well anchored, mainly due to expectations of lower food prices following improved supply.
"The Committee also noted the prospective tightening of fiscal policy which would provide scope for an accommodating monetary policy in the near term. Nevertheless, there is need to remain vigilant on the possible effects of increased uncertainties in the external environment," the CBK stated.
Kenya's inflation rate, which has been a concern at the MPC gatherings, fell to 5% in August from 6.3% in July, keeping within the targeted range of 2.5 to 7.5% under muted demand pressures.
Private sector credit growth also kept pace with the cool-down in inflation, posting a 6.3% jump year-over-year in August from a lesser 6.1% in July.
The narrowing of the current account deficit in July to a record low 4.2% provided further reinforcement of the macro-conditions, driven by lowered food imports and steady export receipts.
However, Kenya's usable foreign exchange reserves have been on the decline in the past two months, falling to Ksh.944.8 billion ($9,091 million) or an equivalent 5.7 monthly import cover as the CBK let go of more dollars to fight off further currency depreciation.
The CBK remains vigilant on the external environment, which has been presented by ongoing trade tensions between the US and China and the growing risk of a no-deal Brexit, resulting in a downturn in global growth expectations across 2019.
While Central Banks in advanced economies have adopted an accommodating monetary policy framework to support growth, the CBK remains on the lookout for further global financial markets volatility.
