Kenya’s Central Bank has retained the benchmark interest rate at 8.5%, going against market expectations of a radical belt-tightening to fight inflation and stabilise the shilling. This maintains its conservative attitude on monetary policy.
The Monetary Policy Committee, which met earlier today, said it will continue to monitor any emergent risks from the external and domestic economies that may impact on price stability. Inflation has been trending up over the past three months while the shilling has glided past the 95-mark verses the dollar.
The committee, chaired by Deputy CBK Governor, concluded that there were no demand-driven threats to inflation. “However, the recent developments in the global and domestic foreign exchange markets have triggered inflationary expectations and present a threat to the price stability objective of the CBK,” the MPC said in a statement.
“The MPC will therefore pursue the current tightening bias stance in the money market through the CBK monetary policy operations in order to anchor inflationary expectations.”
The committee noted that despite upward pressure from food prices attributed mainly to delayed rainfall, overall inflation remained within the Government target range in March and April 2015.
Overall month-on-month inflation rose from 6.31% in March 2015 to 7.08% in April 2015. The month-on-month food inflation rose significantly from 10.96% to 13.42%. The month-on-month non-food-non-fuel inflation rose slightly from 3.16% to 3.53% in the period.
