Kenya Central Bank Keeps Benchmark Interest Rate Unchanged at 9%

(Bloomberg) -- Kenya’s central bank kept its benchmark interest rate unchanged for a fifth consecutive meeting even after inflation surged to a 19-month high.

The Monetary Policy Committee held the rate at 9%, Governor Patrick Njoroge, whose first four-year term ends next month, said in an emailed statement Monday from the capital, Nairobi. That matched the forecast of three of the four economists in a Bloomberg survey. One predicted a 100-basis point increase.

Read more about the successes and difficulties of Governor Patrick Njoroge’s four years in office

Key Insights:

• The unchanged stance shows that the central bank sees less inflation risks than the government. The Parliamentary Budget Office said in a report earlier this month that price growth, which was at 6.6% in April, could reach 11% by the end of the year if food scarcity due to a drought and more expensive electricity persist.
• Inflation has been inside the target band of 2.5% to 7.5% since September 2017 and the central bank said it will remain inside this range “in the near term.” The release of corn stocks from the Strategic Grain Reserve will support the stability of food prices, according to the statement.

What Bloomberg’s Economist Says

“We expect the Central Bank of Kenya to remain on hold through year-end as food prices normalize somewhat after the 10% increase in March and April. However, policy makers may be forced to hike rates in the second half as inflation threatens to push through the ceiling of their 2.5%-to-7.5% target range.”

--Mark Bohlund, economist
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--With assistance from Prinesha Naidoo and Renee Bonorchis.

To contact the reporter on this story: David Herbling in Nairobi at dherbling@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Rene Vollgraaff

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