Central Bank of Kenya Governor Njuguna Ndung’u. FILE PHOTO |
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Central Bank of Kenya (CBK) has retained the policy interest rate at 8.5 per cent for a record 20th consecutive month, citing lingering inflation signs.
Kenya shilling exchange rate has appeared under pressure even reaching a point where it hit a three-year low after remaining relatively stable.
The Central Bank of Kenya (CBK) has retained the policy interest rate at 8.5 per cent for a record 20th consecutive month, citing lingering inflation signs.
The Monetary Policy Committee (MPC) has been trying to balance between holding back inflation and keeping the wheels of the economic activity moving.
“The MPC decided to retain its policy stance by maintaining the CBR at 8.50 per cent in order to continue anchoring inflationary expectations,” said governor Njuguna Ndung’u who chairs the Monetary Policy Committee (MPC) in a statement.
Prof Ndung’u, however, added the “CBK will continue to monitor the key macroeconomic aggregates and any emergent risks from the external and domestic economies that may impact on price stability”.
In recent times, the Kenya shilling exchange rate has appeared under pressure even reaching a point where it hit a three-year low after remaining relatively stable.
The MPC, however, said the exchange rate was generally stable with only short-term fluctuations.
“The exchange rate remains stable despite short-term pressures arising from external events in the Eurozone and the United Kingdom that have resulted in a flight to safety and the strengthening of the US dollar,” Prof Ndung’u said.
The MPC said the confidence in the economy remained strong, noting the activity at the Nairobi Securities Exchange was buoyant partly supported by sustained foreign investor participation.
The MPC noted the growth of Kenya’s main trading partners in the region is projected to gain momentum in 2015 and support the shilling.
“This [growth in region] is expected to boost exports and support exchange rate stability. These developments, coupled with the declining international oil and food prices indicate a stable outlook for inflation,” said Prof Ndung’u.
The monetary authority said the latest data and stress tests show that the banking sector remains resilient.
The MPC says cash availability in the market supported the interbank market. Interbank rate has lately come under pressure as CBK scooped liquidity to support the shilling but the regulator said short-term rates had stabilised.
Analysts had widely expected the CBK to retain the policy rate at the current level. The fall in energy and food prices have largely informed the CBK boldness in overlooking mounting pressure on the shilling as capital imports rise over massive building projects.
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