Kenya’s central bank, the Central Bank of Kenya (CBK), opted to maintain its benchmark lending rate at 13.0% on Wednesday.
The Monetary Policy Committee (MPC), decision comes despite some positive economic indicators, such as stable inflation and exchange rates.
“The Monetary Policy Committee (MPC) concluded that the current monetary policy stance will ensure that overall inflation remains stable around the mid-point of the target range in the near term while ensuring continued stability in the exchange rate,” the central bank said in an emailed statement.
This means loan interest rates for Kenyans are likely to remain high for the foreseeable future.
Inflation remains within the government’s target range (2.5-7.5%) at 5.1% in May, up slightly from 5.0% in April. However, food inflation rose due to recent heavy rains, while fuel and non-food non-fuel inflation declined.
“Overall inflation is expected to remain stable around the mid-point of the target range in the near term, supported by the stable exchange rate, improved food supply attributed to favourable weather conditions, stable fuel prices, and the impact of monetary policy actions which continue to filter through the economy,” said CBK
Exchange Rate Stability
The regulator also noted that the Kenyan shilling has stabilized against the dollar after a successful $1.5 billion government bond issuance in February.
In May, the Kenya Shilling gained 2.3% against the US Dollar, to close the month at KES 130.2, from KES 133.3 recorded at the end of April 2024.
Economic Growth
The central bank expects robust economic performance in 2024 despite earlier flooding, supported by strong service and agricultural sectors.
“The economy is expected to remain strong in 2024, supported by the resilient services sector, robust performance of the agriculture sector, and continued implementation of government measures to boost economic activity across priority sectors,” the central bank said.
The Kenya National Bureau of Statistics data show the economy grew 5.6% in 2023 from 4.9% the previous year.
