CBK Commits to Reforms For Forward Looking Monetary Policy

President Uhuru Kenyatta on Tuesday signed into law the Central Bank of Kenya (Amendment) Bill 2021 which will allow the regulation of digital lenders.

Central Bank of Kenya Kisumu Branch I Khusoko

The Central Bank of Kenya (CBK) says it is committed to enhancing its monetary policy effectiveness.

“Despite the tremendous achievements so far, some issues remain to be addressed…” Dr Patrick Njoroge, CBK Governor says in the 72- page White Paper.

The White Paper outlines additional reforms termed necessary to ‘fully adopt a forward-looking monetary policy framework’.

“These reforms will enhance the effectiveness of monetary policy and support better anchoring of inflation expectations in view of the changing economic and financial environment,” the MPC said.

The monetary policy framework will be supported by reforms aligning it to the new economic and financial realities.

Key among them, refining macroeconomic modelling and forecasting frameworks in line with the changing structure of the economy.

Two, improving the functioning of the interbank market in order to strengthen monetary policy transmission and operations.

Thirdly, enahncing its communication and understanding of monetary policy decisions.

The key objective of the Central Bank’s Monetary Policy Committee is to maintain price stability in the economy, maintenance of low and stable inflation.

The Monetary Policy Committee is the organ of the Central Bank of Kenya responsible for formulating monetary policy. 

The MPC meets at least every two months to make decisions aimed at ensuring that the supply of money in the economy is consistent with growth and price objectives set by the government.