(Bloomberg) -- Kenya’s central bank kept its benchmark interest rate unchanged at a 12-year high as it expect inflation to continue to slow in the near term.

The monetary policy committee held the rate at 13%, Governor Kamau Thugge said Wednesday in a statement on X. That matched the median estimate of seven economists in a Bloomberg survey. 

“Inflation is expected to continue declining in the near term, supported by lower food and fuel prices and pass through effects of the recent exchange-rate appreciation,” said Thugge. “Therefore the MPC concluded that the current monetary policy stance will ensure that overall inflation continues to decline towards the 5% midpoint of the target range.”

Inflation slowed to 5.7% last month from 6.3% in February, aided by a rally in the currency.

The currency has gained about 24% against the dollar since the MPC’s Feb. 6 meeting, making it the best performing currency in the world of those tracked by Bloomberg. The surge has been driven by a mix of factors, including the partial roll over of a $2 billion eurobond maturing in June and two successive interest-rate hikes in December and February of a combined 250 basis points.

Yields on Kenya’s eurobond due 2031 fell slightly after the decision was announced, according to Bloomberg pricing.

Key Insights:

  • Kenya’s foreign-exchange reserves remained below the critical four-month imports cover threshold  but are seen getting a boost from expected inflows from the World Bank and International Monetary Fund.
    • They stood at $7.136 billion, equivalent to 3.77months of import cover.
  • Growth in private-sector credit fell to 10.3% in February, compared with 13.8% a month earlier.
  • The ratio of non-performing loans to gross loans held by Kenyan banks deteriorated to 15.5% in February from 14.8% in December, centered mainly on the real estate and construction sectors.

(Updates with more detail throughout)

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