The CBK, through its top decision-maker, the Monetary Policy Committee (MPC), has retained the key policy rate at 7%, stating that the current accommodative monetary policy stance remains appropriate.
The CBK first lowered the Central Bank Rate (CBR) to 7% at its MPC meeting in April 2020 and has retained this rate for close to two years now.
The Monetary Policy Committee(MPC), the top think tank of the Central Bank of Kenya(CBK), met on March 29th 2022, against the backdrop of a changed global outlook with heightened geopolitical tensions, volatile commodity prices, the coronavirus pandemic and measures taken by authorities around the world in response to these developments.
Overall inflation declined to 5.1 per cent in February 2022 from 5.4% in January due to lower food and fuel prices.
MPC said inflation is expected to remain within the target range in the near term due to muted demand pressures and policy interventions.
But the Committee said the increased risk of inflation pressure remains due to global uncertainties.
The global scene remains uncertain due to the Russia-Ukraine conflict that began at the end of February 2022 and a spike in COVID-19 cases, especially in China.
Prices of commodities, particularly oil, wheat and fertilizer, have risen sharply due to supply disruptions, fueling the already elevated global inflationary pressures.
Financial market volatility has increased amid adjustments in monetary policy in advanced economies.
The Committee said Kenya’s economy is expected to remain resilient, supported by robust activity in construction, information and communication, wholesale and retail trade, transport and storage, and manufacturing sectors.
It added that Kenya’s economy is expected to remain resilient, supported by the recovery in agriculture and continued strong performance of the services sector, despite the downside risks to global growth in 2022.
The MPC observed that the CBK forex reserves, which currently stands at US$ 7,850 Million or 4.80 months of import cover, continue to provide adequate cover and buffer against any short term shocks in the local forex market.
The Committee said growth in private sector credit increased to 9.1% in February 2022 from 8.6% in December 2021. Strong credit growth was noted in transport and communication(24.1%), manufacturing(7.6%), trade(8.9%), consumer durables( 14.0%) and business services( 11.6%).
The number of loan applications and approvals remained strong, reflecting improved demand with increased economic activities.
The Committee noted the steady implementation of the 2021/22 Government Budget, particularly the strong revenue performance to February 2022, reflecting enhanced tax collection efforts and increased economic activity following the easing of COVID-19 containment measures.
The continued execution of the economic stimulus programme and the economic recovery strategy was also noted by the Committee, which is expected to support the economy and cushion the most vulnerable.
While the MPC retained the Central Bank Rate(CBR), the think tank said it would continue to monitor the impact of the policy measures and developments in the global and domestic economy and stands to take additional measures as necessary.
The Committee will meet again in May 2022 but remains ready to re-convene earlier if necessary.
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