Kenya Central Bank Leaves Benchmark Rate Unchanged at 9%

(Bloomberg) -- Kenya’s central bank kept its benchmark interest rate unchanged for a sixth consecutive time, saying inflation expectations remain well-anchored.

The Monetary Policy Committee held the rate at 9%, Governor Patrick Njoroge said Wednesday in a statement in the first rates decision since his reappointment for a second term. That was in line with the forecast of all six economists in a Bloomberg survey.

Key Insights:

• The unchanged stance comes even as the shilling is weakening and food costs rose when a drought caused shortages. The central bank said inflation is expected to remain inside the target range of 2.5% to 7.5% “in the near term, largely due to expectations of lower food prices following improved weather conditions, and lower electricity prices with the reduced reliance on expensive power sources.”
• The shilling has been on a weakening streak against the dollar since June. It fell to 104.1 per dollar by 4:48 p.m. in Nairobi on Wednesday, its lowest in nearly four years, partly undermined by the arrest and indictment of the nation’s former Treasury Secretary Henry Rotich on corruption charges.
• The MPC said even as inflation expectations are well-anchored, it needs to be vigilant about
  the possible effects of the recent increases in fuel costs, the ongoing replacement of older 1,000 shilling notes and increased global uncertainty on price growth.
• Private-sector credit grew 5.2% in the 12 months through June, compared with 4.4% in May as banks are resuming lending.

--With assistance from Simbarashe Gumbo.

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, Rene Vollgraaff

©2019 Bloomberg L.P.