Kenya’s central bank maintained its benchmark lending rate at 13.0% on Wednesday, saying inflation was stable within its short-term target range and it aimed to keep the exchange rate stable.
This is the second time that the bank has maintained its rate, after leaving it unchanged in April. The bank raised rates in December and February to stabilize the exchange rate and help control soaring inflation.
“The Monetary Policy Committee (MPC) concluded that the current monetary policy stance will allow headline inflation to remain stable around the midpoint of the short-term target range, while ensuring continued stability in the inflation rate. change,” the central bank said in a statement.
In August, the bank
introduced a new interest rate corridor
to help steer short-term market interest rates toward the central bank’s policy rate. It had set the rate at plus or minus 250 basis points around the key rate.
On Wednesday, the bank said it had also adjusted the discount window rate to 300 basis points above the central bank rate, from 400 basis points previously. The discount window rate is what it charges commercial banks that borrow as a last resort from the regulator.
The Kenyan shilling stabilized against the dollar after the government managed to raise $1.5 billion on international markets in February to partially buy back another bond maturing in June.
Inflation, which has remained at the upper end of the government’s preferred range (2.5-7.5%) for months, increased slightly to 5.1% in May from 5.0% in the month previous.
Official statistics show that Kenya’s economy grew by 5.6% in 2023, up from 4.9% the previous year.
The central bank said it expected robust economic performance in 2024, despite the effects of widespread flooding earlier in the year.
“The economy is expected to remain strong in 2024, supported by the resilience of the services sector, the robust performance of the agricultural sector and the continued implementation of government measures aimed at stimulating economic activity in priority sectors,” a declared the central bank. (Reporting by George Obulutsa, Editing by Bate Felix and Toby Chopra)
