Kenya: Central Bank stands pat in September
At its 28 September meeting, the Monetary Policy Committee of Kenya’s Central Bank decided to leave its key rate unchanged at 7.00%, marking the tenth consecutive hold, after having cut it by 125 basis points during March–April 2020.
Estimates of a strong recovery in 2021, coupled with relatively well-anchored inflation expectations, were largely behind the Bank’s decision to maintain its accommodative stance. Available indicators point to a robust recovery this year, while ongoing vaccination efforts at home and abroad should further support the services sector and buoy demand globally. Meanwhile, despite mounting price pressures recently due to higher fuel and food costs, inflation is expected to remain within the Bank’s 2.5%–7.5% target band in the medium term.
The Bank’s communiqué did not include any strong forward guidance. However, unlike previous meetings, the Bank put stronger emphasis on building price pressures and inflation expectations, stressing that it will “need to closely monitor developments in inflation and stands ready to respond to any second-round effects”. Most of our panelists expect the Central Bank rate to end 2021 at 7.00%.
The next meeting is scheduled to take place in November.