Kenya Central Bank Holds Key Rate as It Signals Future Easing

(Bloomberg) -- Kenya’s central bank kept its benchmark interest rate unchanged for a seventh consecutive meeting as inflation is seen staying inside the target, and signaled that it may start cutting soon.

The Monetary Policy Committee held the rate at 9%, Governor Patrick Njoroge said Monday in an emailed statement from the capital Nairobi. That was in line with the forecast of all three economists in a Bloomberg survey.

Key Insights:

• Kenya’s Treasury has cut its planned spending for 2019-20. This tightening of fiscal policy would provide scope for more accommodative monetary policy in the near term, Njoroge said. The central bank last lowered borrowing costs in July 2018.
• The decision also indicates the central bank sees fewer inflation risks despite concerns over potential food shortages due to a drought. Price growth has been within the target band of 2.5% to 7.5% since September 2017.
• The shilling has been on the back foot against the dollar in the past six months. It traded at 103.88 by 4.30 p.m. in Nairobi on Monday. The central bank is monitoring ongoing effect of the replacement of 1,000 shilling notes with newly designed notes for any impact on inflation.
• Private-sector credit growth 6.3% in the 12 months to August shows signs of recovery in bank lending. Lawmakers are debating legislation to maintain a cap on commercial lending rates that the central bank says is complicating the transmission of monetary policy decisions.

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, Helen Nyambura, Jacqueline Mackenzie

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