Monetary Policy Committee to meet without governor

What you need to know:

The MPC’s predecessor was the Monetary Policy Advisory Committee (MPAC), whose mandate was merely to make recommendations unlike the MPC which is a policy-making organ.
The MPC holds the meeting amid concerns over turbulence in the foreign exchange market and rising inflation.

The Monetary Policy Committee (MPC) of Central Bank of Kenya will on Wednesday meet for the first time without a substantive governor in office.

Prof Njuguna Ndung’u chaired his last MPC meeting in early March, but his replacement is yet to be appointed. Prof Ndung’u was appointed for his first term in March 2007 and chaired the policy committee since its creation in 2008 as required by law.

The MPC’s predecessor was the Monetary Policy Advisory Committee (MPAC), whose mandate was merely to make recommendations unlike the MPC which is a policy-making organ.

The MPC holds the meeting amid concerns over turbulence in the foreign exchange market and rising inflation. The shilling has touched a low of 95 units to the dollar in recent weeks, from about Sh90 at the beginning of the year.

READ: Cost of living to rise as shilling hits 95 to dollar

In April, inflation also hit seven per cent, getting close to the 7.5 per cent upper limit prescribed by the National Treasury.
During this financial year, the Central Bank of Kenya (CBK) is supposed to maintain overall inflation at between 2.5 and 7.5 per cent.

One of the MPC’s macroeconomic pricing tools is the Central Bank Rate (CBR), which has not been changed for the past 24 months. It has remained at 8.5 per cent with the Committee trying to balance between the need to keep the shilling stable and also grow the economy at the same time.

The MPC will also meet as economic growth in 2014 stood at 5.3 per cent, lower than the 5.7 per cent of the previous year. The poor performance of the tourism sector was one of the main factors behind the lower growth.

Haron Sirima, deputy CBK governor is expected to chair the meeting in the absence of a chairman – who is supposed to be the CBK governor – as specified under the CBK Act.

Dr Sirima was appointed by then Finance minister Uhuru Kenyatta in October 2011 following the death of Hezron Nyangito and is one of the top contenders for the governorship.

The MPC has nine members with five making a quorum for a formal meeting on the CBR and other monetary policy matters. The quorum must include either the governor or his deputy.

Currently, the CBK is waiting for the appointment of a new governor, deputy governor and chairman following interviews by the Public Service Commission (PSC) last month.

The appointments are made by the president after Parliament vets of the names submitted by the PSC.