CBK holds key lending rate at 9 percent
The Central Bank of Kenya (CBK) has for the third consecutive time held its benchmark interest rate at 9 percent as it attributes the stay on the Central Bank Rate (CBR), to the continued stability of the country’s macroeconomic fundamentals.
Month-on-month inflation for instance held stable across 2018 to fall within the government target range of 2.5 to 7.5 percent. This is in spite of instances of notable hikes midyear resulting mainly from Treasury’s move to spur increased revenue mobilization through additional taxation.
“The MPC Private Sector Market Perception Survey conducted in January 2019 indicated that Inflation expectations were well anchored within the target range, with respondents revising their inflation expectations for the near term downwards on account of expected lower prices of food, fuel and electricity,” CBK’s Monetary Policy Committee (MPC) noted in its press statement issued Monday.
The foreign exchange market likewise remained stable, supported by balanced flows and a narrowing current account deficit supported by strengthened diaspora remittances and tourism receipts. The stability was also attributed to greater horticultural exports and a slower growth in imports as international oil prices tumbled as food and Standard Gauge Railway (SGR) related equipment imports eased.
The outcome of a strengthened foreign exchange market has seen CBK foreign exchange reserves hold at Ksh. 818 billion (USD 8.1 billion) which equates to a 5.3 months import cover to continue to provide adequate cover and a buffer to currency fluctuation against short-term shocks in the foreign exchange market.
Moreover, Kenya’s economy picked strongly with Gross Domestic Product (GDP) peaking at six percent in the first three quarters of 2018 from an average 4.7 percent over a similar period in 2017.
The improved performance was reflected by higher agricultural production, the continued recovery of the manufacturing sector and a buoyant services sector.
CBK, however, remains cognizant to increased global uncertainties which are likely to impact on the local economy growth prospects.
“The MPC will continue to closely monitor developments in the global and domestic economy and stands ready to take additional measures as necessary,” the bank noted.