Kenya’s central bank retained its benchmark lending rate at 11.5% on Wednesday, saying that the current inflation pressures are temporary, and that the monetary policy measures currently in place are containing any demand pressures in the economy.
Inflation rose to 8.01 percent last month but the bank’s Monetary Policy Committee (MPC) said the rise was driven by seasonal factors like the supply of fresh food, including vegetables.
The regulator also noted that New Excise Taxes on alcoholic beverages and tobacco products, introduced on December 1, contributed 0.3 percentage points to overall inflation and 1.2 percentage points to the non-food-non-fuel (NFNF) inflation
“The Committee concluded that the current inflation pressures are temporary, and that the monetary policy measures currently in place are containing any demand pressures in the economy,” the MPC said in a statement.
The bank raised rates by a total of 300 basis points in June and July last year after exchange-rate volatility shot up and inflation threatened to take off.
The central bank also kept the Kenya Banks’ Reference Rate , which is meant to be used by commercial banks to set their lending rates, at 9.87 percent. The banks’ reference rate has been deemed ineffective by experts who say loans at banks remain pricey despite its introduction.
It said the shilling had remained stable at just above 102 shillings per dollar, shrugging off the impact of the U.S. interest rate hike, the economic slowdown in China and other volatility in global financial markets.
The CBK also noted that it will continue to use the instruments at its disposal to maintain overall price stability while ensuring stability in the financial sector.
