Kenya Holds Rate at Decade-Low as Inflation Seen in Target

(Bloomberg) --

Kenya’s central bank held its key interest rate at a decade-low to aid economic growth as inflation expectations remain anchored within its target band.

The monetary policy committee kept the benchmark rate at 7%, Governor Patrick Njoroge said Tuesday in an emailed statement. All but one of five economists surveyed by Bloomberg expected the bank to stand pat.

Key Points:

• Inflation accelerated in August to an 18-month high of 6.6%. The central bank expects the rate to remain within its target range of 5% with a margin of 2.5 percentage points on either side in the medium term, Njoroge said. The MPC expressed concern about rising domestic and international inflation and stands ready to act to counter any second-round effects, he said.
• Private sector credit grew 7% in August, compared with 6.1% a month earlier, driven by the transport, communication and manufacturing industries.
• The ratio of non-performing loans to gross loans was 13.9% in August, compared with 14% in July. The improvement was helped by repayments and recoveries in the tourism industry.
• Leading economic indicators point to a strong gross domestic product recovery this year, supported by the construction, manufacturing and real-estate industries, Njoroge said.
• NOTE: East Africa’s biggest economy shrank 0.3% in 2020, the first contraction in nearly three decades, according to International Monetary Fund data.

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