Kenya’s central bank kept its benchmark interest rate unchanged for an 11th consecutive meeting as inflation is expected to remain within its target range in the near term and the economy’s recovery from a coronavirus-induced contraction in 2020 remains strong.
The monetary policy committee held the rate at 7%, Governor Patrick Njoroge said Monday in a statement on Twitter. That matched the forecast of all six economists in a Bloomberg survey.
“Inflation expectations remained anchored within the target range, and leading economic indicators showed continued robust performance,” Njoroge said.
- Inflation that slowed for the first time in six months in October to 6.5%, after authorities tapped a stabilization fund to lower pump prices, is expected to remain within the central bank’s target of 2.5% to 7.5% over the near term, said the governor. That’s as demand pressures remain muted even after the government eased Covid-19 lockdown restrictions and lifted a dusk-to-dawn curfew in October.
- Kenya’s economy expanded at the fastest pace in at least two decades in the second quarter after its worst contraction in almost three decades in 2020. Leading economic indicators point to a continuing recovery in the second half of the year, Njoroge said. Growth is projected to remain strong in 2022 supported by the reopening of the economy and the easing of supply chain bottlenecks, he said.
- Price risks include a further depreciation in the currency that’s trading at a record low, drought and the re-emergence of desert locusts that threaten the country’s food security. Foreign-exchange reserves of $8.8 billion, or 5.36 months of imports, will continue to provide adequate cover and a buffer against short-term shocks in the currency market, the governor said.
- Private sector credit grew 7.8% in October from 7% in August.
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