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Kenya Holds Rate at 2015 Low for Fourth Meeting as CPI Anchored

Kenya Holds Rate at 2015 Low for Fourth Meeting as CPI Anchored

(Bloomberg) -- Kenya’s central bank kept its key interest rate unchanged for a fourth consecutive meeting as inflation remained well anchored within the target range and the economy operates “close to its potential.”

The Monetary Policy Committee held the rate at 9 percent, Governor Patrick Njoroge said in an emailed statement Wednesday from the capital, Nairobi. That matched the forecast of all eight economists in a Bloomberg survey.

Kenya Holds Rate at 2015 Low for Fourth Meeting as CPI Anchored

Key Insights

  • After unexpectedly easing policy in July, the MPC is now watching the potential inflationary impact of a drought that’s left more than a million people in need of food aid. A previous dry spell in 2016 and 2017 pushed price growth above authorities’ target band of 2.5 percent to 7.5 percent as food costs surged.
  • Inflation, which slowed to 4.1 percent in February, will probably remain within the target range in the near term because food supplies remain adequate despite the drought, the MPC said.
  • The MPC’s private-sector market-perception survey conducted in March indicated that inflation expectations remained well anchored within the target range, with respondents lowering expectations for the near term further because of stable food prices and lower electricity costs, it said.
  • The implementation of a court ruling this month that annulled a law limiting what lenders can charge consumers was suspended for a year. That means interest-rate caps stay in place for now and because this weighs on lenders’ willingness to extend credit, it limits the scope for monetary policy to boost economic growth.

--With assistance from Simbarashe Gumbo.

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, Ana Monteiro

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