The Central Bank of Kenya (CBK) has retained the base lending rate at nine percent for the 16th consecutive month on the back of predictable inflationary pressures.
In a statement issued following its bi-monthly Monetary Policy Committee (MPC) meeting held earlier on Monday, the reserve bank attributed the hold in the borrowing rates to stability in the core consumer prices amidst ongoing global turbulence.
“The MPC private sector market perception survey conducted in September indicates that inflation expectations remain well anchored, mainly due to expectations of lower food prices following improved supply,” read the statement in part.
“The Committee also noted the prospective tightening of fiscal policy which would provide scope for an accommodating monetary policy in the near term. Nevertheless, there is need to remain vigilant on the possible effects of increased uncertainties in the external environment”
Inflation which features largely as an ongoing concern at the MPC gathering has for instance fallen to a flat five percent in August from 6.3 percent in July to keep within the targeted range of 2.5 to 7.5 percent under muted demand pressures.
Meanwhile, private sector credit growth kept in touch with the cool down in inflation having posted a 6.3 percent jump year over year in August from a lesser 6.1 percent in July.
The narrowing of the current account deficit in July to a record low 4.2 percent provided for the further reinforcement of the macro-conditions on the back of lowered food imports and steady export receipts.
Kenya’s usable foreign exchange reserves have however been on the decline in the past two months having fallen to Ksh.944.8 billion ($9,091 million) or an equivalent 5.7 monthly import cover as the CBK let go of more dollars in the period to fight off further currency depreciation.
The risk for pervasive outcomes has nevertheless lied in the external environment presented by the two way punch of ongoing trade tensions between the US and China and the ever growing risk of a no deal Brexit which has resulted to a downturn in global growth expectations across 2019.
While Central Banks in advanced economies have adopted to an accommodating monetary policy framework to support growth, the CBK remains on the lookout for further global financial markets volatility.