Kenya’s Monetary Policy Committe retains Policy Rate at 11.50 percent

Nairobi, Kenya, Capital Market in Africa — At the end of the September 22nd 2015 Monetary Policy Committee (MPC) meeting, the MPC kept the policy rate (Central Bank Rate — CBR) at 11.5 percent, with intention to  keep inflation in control which was trending towards the five percent target. The  benchmark interest rate, was kept unchanged for the third time after it was raised in July by 150 basis points to current level. 

The MPC, also highlighted that the KES 655 billion (about US$6.2 billion) worth of Forex reserves and the KES65 billion (US$610.7 million) precautionary facility from the International Monetary Fund were adequate cushions against volatility in the value of the Kenyan shilling. 

 “The MPC observed that the measures taken in the previous meetings had continued to bring inflation nearer to the 5 per cent target … the Committee therefore decided to retain the CBR at 11.50 per cent to anchor inflation expectations,” said MPC chairman and CBK governor, Patrick Njoroge in a statement.

The CBK governor, said the MPC was still aware of the persistent turbulence in the global financial markets remain a risk to the inflation outlook, and its impact on the exchange rate should be monitored.

Mr. Njoroge, further emphasised that the Central Bank of Kenya (CBK) stands ready to use the instruments at its disposal to maintain overall price stability. Among other tools, the CBK uses liquidity-controlling, repurchasing agreements, forex sales and purchases and term auction deposits in its daily operations.

It also uses moral suasion with the market participants as well as legal controls when needed to keep domestic prices – including the exchange rate and interest rates – stable.

The MPC noted that month-on-month non-food-non-fuel inflation, also called core inflation, reversed its upward trend since April, falling to 4.5 per cent in August from 4.7 per cent in July. The decrease in inflation was attributed to fall in food prices and moderating demand pressures, partially offsetting the pass-through effects of exchange rate movements.

The governor said the exchange rate had been volatile in August and early September largely due to international developments, particularly the impact of the devaluation of the Chinese Yuan and strengthening of the US dollar.

 To read MPC’s statement click MONETARY POLICY COMMITTEE MEETING Release Statement