The central bank of Kenya has cut its benchmark interest rate by 50 bps (0.5%) to 9.5 percent on March 19th 2018. This is the first cut since September 2016 and the committee said it would closely monitor the impact of this cut along with changes to the global and domestic economy.
In a statement, the bank said the decision was driven by need to ease its monetary policy stance in order to support economic activity.
“The MPC noted that inflation expectations were well anchored within the Government target range, the increased optimism for growth prospects in the economy, and that economic output was below its potential level.. {……} Consequently, while noting the risk of perverse outcomes, the Committee decided to reduce the Central Bank Rate (CBR) to 9.50 percent from 10.00 percent.”
The bank also noted that it expects overall inflation to lie within the Govt’s target range in the near term mainly due to expectations of contained food prices due to improved weather conditions. Additionally, CBK says its foreign exchange reserves are at an all-time high of USD8,832 million equivalent to 5.9 months of import cover.
“The recently extended precautionary arrangement with the International Monetary Fund equivalent to USD989.8 million, will provide an additional buffer against exogenous shocks.” it noted.
The Governor of the Bank, Dr Patrick Njoroge will on tomorrow, March 20, 2018 hold a briefing to in regards to the above decision as well as give an update on the state of the banking industry.
