Kenya’s Central Bank Holds Rates, Puts Easing on Table

• The Central Bank of Kenya (CBK) re-opened two 20-year bonds namely, FXD1/2012/20 ( 17.9 years to maturity) and FXD1/2019/20 (11.4 years to maturity) to raise KES.30Bn.

The Central Bank of Kenya on Wednesday left the benchmark interest rate unchanged at 7 per cent for the ninth time.

However, it said it stands ready to take additional measures in order to support the economy hit by the Coronavirus (Covid-19) pandemic.

“The Committee noted that inflation expectations remained well anchored within the target range, and the economy continued to operate below its potential level,” said Dr Patrick Njoroge in an emailed statement on the decisions taken by the central bank’s Monetary Policy Committee (MPC).

The hold in the benchmark lending rate was largely in line with broad market expectations.

“The 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,” Njoroge said.

The MPC noted that the leading indicators for the economy point to a relatively strong gross domestic product (GDP) recovery in the first half of 2021, mainly supported by the strong performance of construction, information and communication, education, and real estate sectors.

However, from its Private Sector Market Perceptions Survey, concerns were raised on the continued uncertainties over the pandemic, increased taxes and heightened political activity.

On the other hand, they observed a ‘general optimism about economic growth prospects for the year.

“Respondents attributed this optimism to the continuing vaccinations and easing of COVID-19 containment measures.

Additionally, respondents were optimistic about the expected implementation of measures in the FY 2021/22 Budget, including the economic stimulus programme and the continued investment in infrastructure.” 

It further noted that the foreign exchange reserves, which currently stand at one trillion shillings (about 9.35 billion U.S. dollars) which is equivalent to 5.72 months of import cover and continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.

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