The Central Bank of Kenya(CBK) top policy organ, the Monetary Policy Committee( MPC) is holding its first meeting on Wednesday this week.
If the MPC retains the Central Bank Rate at 7%, it will be the 12th consecutive time that the policy think tank has done so.
The CBK cut the policy rate from 7.25 to 7% when the MPC met on April 29, 2020, against a backdrop of the global COVID-19 (coronavirus) pandemic and measures taken by authorities around the world to contain the spread and impact of the pandemic.
Analysts expect the CBK top policy organ to retain the CBR in the short term at 7.00% with a bias towards an increase in the medium term as the economy continues to improve.
CBK will be meeting amid rising oil prices and growing tense political situation due to 2022 polls
Additionally, a slight upward pressure on the interest rates especially in Q3’2022 is expected as the government compensates investors for the increased risk and uncertainty posed by the upcoming 2022 general elections.
The CBK held its last MPC last meeting on November 29th, 2021, against a backdrop of the global COVID-19 (coronavirus) pandemic, continued rollout of vaccination programmes, other measures taken by authorities around the world to contain its spread and impact, and the emerging developments regarding a new COVID-19 variant.
The MPC considered the implications and outcomes of the measures implemented to mitigate the adverse economic effects and financial disruptions from the pandemic.
In 2021, most Central’s banks maintained the accommodative monetary policies adopted in 2020 with the intention to spur economic growth.
CBK is thus expected to tighten these accommodative stances to be tightened, given the increasing global inflation as a result of high oil and energy prices, coupled with persisting supply chain constraints.
Tightening of monetary policy will be driven by the need to control the surging inflation by reducing the monetary supply and easing upward cost pressures.
The Central Bank Rate is expected to remain unchanged in the short term at 7.00% with a bias towards an increase in the medium term as the economy continues to improve.
Additionally, analysts see slight upward pressure on the interest rates especially in Q3’2022 as the government compensates investors for the increased risk and uncertainty posed by the elections.
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