Kenya Holds Rate at Three-Year Low as Inflation Is ‘Anchored’

(Bloomberg) -- Kenya’s central bank kept its benchmark interest rate at a three-year low for a second time even as concerns mount about an expected acceleration in inflation from higher fuel prices.

“Inflation expectations remained well anchored within the target range,” Governor Patrick Njoroge said in an emailed statement Tuesday from the capital, Nairobi. The monetary policy committee, which has a target range of 2.5 percent to 7.5 percent for inflation, last cut the rate in July.

Key Insights:

• Tuesday’s decision to hold the rate at 9 percent was in line with 10 analysts surveyed by Bloomberg, who cited inflationary pressure expected to build on the back of first- and second-round shocks brought about by fuel prices.
• Read more about the effect of tax on fuel prices in Kenya
• The shilling has lost 2 percent since touching a peak of 99.87 shillings on July 16. The currency, which was down 0.2 percent to 102.72 by 4:36 p.m., has been on the back foot since the International Monetary Fund said it was overvalued by more than 17 percent and that it was no longer considered a “floating currency.”

To contact the reporter on this story: Adelaide Changole in Nairobi at achangole2@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Helen Nyambura, Ana Monteiro

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