In its last meeting of 2017, the central bank of Kenya kept its benchmark interest rate unchanged at 10 percent for the 14th consecutive meeting on November 23rd, 2017, as widely expected.
The MPC committee said the decision largely because inflationary pressures in the economy were muted, and inflation was expected to continue to decline in the short term.
Notes from the MPC Press Release:
“The meeting was held against a backdrop of favourable weather conditions, sustained macroeconomic stability, the conclusion of a prolonged election period, and improved outlook for the global economy.” The bank said in a statement.
- The foreign exchange market has remained stable, supported by strong diaspora remittances, resilient tea and horticultural exports, and the continued recovery in tourism. However, the 12-month current account deficit widened slightly to 6.5 percent of GDP in September 2017 from 6.4 percent of GDP in July 2017. This was largely due to higher international oil prices, and continued import of food to mitigate the adverse effects of the drought. The current account deficit is expected to narrow to 6.2 percent of GDP by December 2017 as a result of a slowdown in SGR-related imports, and improved weather conditions which will support food production and agricultural exports.
- The CBK foreign exchange reserves currently stand at USD7,094 million (4.7 months of import cover).
- Private sector credit grew by 2.0 percent in the 12 months to October compared to 1.7 percent in the 12 months to September. This maintained the upward trend since August 2017. Notably, credit to the domestic trade, manufacturing, and real estate sectors grew by 12.6 percent, 10.2 percent, and 10.0 percent respectively, to October 2017.
- The central bank forecasts 2017 growth of 5.1 percent and to pick up strongly in the medium term supported by a stable macroeconomic environment.