The Monetary Policy Committee has resolved to keep the Central Bank Rate unchanged at 9 per cent. MPC made the decision during its first meeting of 2019. The Central Bank of Kenya (CBK) maintained the benchmark rate amid stable macro-economic conditions, positive economic growth prospects, lower oil prices, and increased uncertainties in the global growth outlook.
The MPC put into the consideration the stable inflation supported by lower food prices, reduced electricity charges, and a drop in fuel prices. November inflation was at 5.6 per cent while December inflation was at 5.7 per cent. The committee added that overall inflation is expected to drop in the short term.
The foreign exchange market remained stable largely due to narrowing current account deficit and balanced flows. Foreign exchange reserves stand at $8,131 million equivalent to 5.3 months of import cover (safely above the East African Community recommended standard of 4.5 months of import cover.)
MPC also cited growth in private sector credit as a reason for retaining the benchmark rate. Credit in the sector grew by 2.4 per cent in the 12 months to December 2018. Highest growth in private sector credit was recorded in finance and insurance (17.5 per cent), consumer durables (11 per cent), business services (8 per cent), and private households (6.8 per cent). The trend is expected to remain unchanged in 2019.
CBK observed a stable and resilient banking sector. The ratio of gross non-performing loans to gross loans dropped to 12 per cent in December from 12.3 per cent in October mainly driven by a decline in non-performing loans.
Kenya’s economy grew strongly in 2018 with real GDP growth of 6 per cent recorded in the first three quarters of the year. The economy is expected to maintain the same growth momentum in 2019.
According to CBK, factors likely to interfere with the projected economic growth in Kenya are slow growth in private sector credit and an expected slowdown in global economic growth due to the US- China trade war, Brexit negotiations, and a slowdown in China’s economy.