CBK Retains Key Lending Rate at 10.5%

In a decision issued yesterday, the Central Bank of Kenya (CBK) defied projections by keeping interest rates at 10.5 percent while also expressing a gloomy global economic outlook that may compel another tightening before the end of the year.

The decision was based on an improved core inflation rate of 6.8 percent in September, which fell within the government’s goal range of 2.5 to 7.5 percent.

The Monetary Policy Committee (MPC) has left the Central Bank Rate (CBR) unchanged for the second time in a row.

The apex bank stated that it expects an enhanced food supply as a result of the ongoing harvest and the government’s tax-free import window.

“In light of these developments, the MPC decided to maintain the Central Bank Rate (CBR) at 10.50%,” CBK governor Kamau Thugge said in a statement issued by the MPC.

According to a CBK review of the agriculture sector conducted in mid-September prior to the policy meeting, prices of major food commodities, particularly maize – the country’s main food – are likely to fall in the coming months.

Food inflation rose to 7.9 percent in September from 7.5 percent in August, owing primarily to price rises in a few major vegetables, namely onions, Irish potatoes, cabbages, spinach, and kale.

Market Perceptions Surveys also revealed increased optimism about company activity and economic growth forecasts in the coming year.