Monetary Policy Committee Unlikely to Change Central Bank Rate at 7%

The Monetary Policy Committee (MPC) will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary to support the economy hit by the COVID-19 pandemic.

Patrick Njoroge Photographer: Luis Tato/Bloomberg

Kenya’s Monetary Policy Committee (MPC) is unlikely to change the Central Bank Rate (CBR) in its first bi-monthly policy review on Wednesday, 27th January 2021.

According to Kenyan market analysts, they expect a status quo on both rates and policy stance, now set at ‘accommodative’.

In its last meeting held on 26th November 2020, the MPC maintained the CBR at 7% citing that the accommodative policy stance adopted in March had the intended effects on the economy.

“The current macro and business environment fundamentals might constrain the transmission of further accommodative cuts, despite the need to stimulate economic growth. Therefore, we believe that any additional rate cuts will not lead to a rise in Private sector credit growth as elevated credit risks still persist in the current environment.,” Cytonn Investments in its note ahead of the  MPC.

On the other hand, the NCBA Research team says the MPC meeting will be conducted on a backdrop of vaccine-driven economic optimism and improving macroeconomic headlines over the last few months.

“To be sure, inflation, although rising remains within target. Since the last review, inflation has risen to 5.62%. Risks to the outlook stem from higher oil prices, weak exchange rates, fresh locust invasions and temporary shocks from higher taxation.”

The Central Bank’s monetary policy decisions are made to maintain a low and stable inflation rate over time, which is an indication of price stability.

Central Bank of Kenya Likely to Maintain Status Quo on Rates in 2021