The Central Bank of Kenya (CBK) maintained the interest rates at 10.5 per cent, contrary to expectations.
This was attributed to an improved core inflation rate, which was recorded at 6.8 per cent in September, falling within the government’s targeted range of between 2.5 and 7.5 per cent.
This is the second consecutive time that the Monetary Policy Committee (MPC) has left the Central Bank Rate (CBR) unchanged.
The CBK expects an improved food supply supported by the ongoing harvest and a tax-free import window opened by the government.
CBK governor Kamau Thugge stated in the MPC statement that, “In view of these developments, the MPC decided to retain the Central Bank Rate (CBR) at 10.50 per cent.”
A survey conducted by the CBK in mid-September ahead of the policy meeting showed that the prices of key food items, particularly maize – the country’s staple food – are expected to decline in the coming months.
Food inflation increased to 7.9 per cent in September from 7.5 per cent in August, largely due to increases in the prices of a few key vegetables, particularly onions, Irish potatoes, cabbages, spinach, and kale.
“Overall inflation is expected to remain within the target range in the near term, supported by lower food prices with the improving supply of key food items, particularly maize, and the implementation of Government measures to improve the supply of sugar through imports,” said the MPC.
Market Perceptions Surveys further revealed improved optimism about business activity and economic growth prospects for the next 12 months.
“Nevertheless, respondents’ concerns included higher fuel and electricity prices, reduced purchasing power affecting demand for products, and the possible negative effects of the El Niño weather phenomenon.”
