CBK retains benchmarking rate at 7%, cites global uncertainties
The Central Bank of Kenya (CBK) has for the umpteenth time retained the Central Bank Rate (CBR) at 7 percent on the account of increased risk of inflationary pressures arising from the global uncertainties.
This is the thirteenth time CBK is maintaining the rate at 7 percent.
“The global economic outlook remains uncertain, reflecting the ongoing Russia-Ukraine conflict that started at the end of February, significant uncertainty about the policy responses in the advanced economies and a spike in COVID -19 cases especially in China.,” said CBK in a statement.
The overall inflation declined to 5.1 percent in February from 5.4 percent in January, mainly due to the effect of Government measures to stabilize fuel prices and lower electricity tariffs.
Food inflation declined to 8.7 percent in February from 8.7 percent in January last year.
“Prices of commodities particularly oil, wheat and fertilizer have risen sharply as a result of supply disruptions, adding to the already elevated global inflationary pressures.”
The CBK said inflation is expected to remain within the target range in the near term, due to muted demand pressure and the policy interventions.
“The committee noted that inflation expectations remain anchored within the target range supported by the government’s policy interventions, and leading economic indicators show improved performance.”
The Monetary Policy Committee (MPC) held the key rate in its second meeting of 2022 in an environment where inflation expectations were within the target band of 2.5 and 7.5 percent and the economy was on the road to recovery.
This follows adverse economic impact and financial disruptions brought about by the Covid-19 pandemic.
“The Monetary Policy Committee (MPC) met on March 29, 2022, against a backdrop of a changed global outlook with heightened geographical tensions, volatile commodity prices, the COVID-19 pandemic and measures taken by authorities around the world in response to these developments.”
The CBK maintained optimism in the resilience of the economy supported by the recovery in agriculture and continued strong performance of the services sector despite the downside risks to global growth in 2022.
Leading indicators point to a strong performance of the Kenyan economy in the first quarter of 2022.
The MPC said this will be supported by robust activity in construction, information and communication, wholesale and retail trade, transport and storage and manufacturing sectors.