The Central Bank of Kenya (CBK) held its benchmark lending rate at 8.5 per cent in its monetary policy meeting on Tuesday, even as it voiced concerns about the country’s inflation rate.

The CBK held the central bank rate (CBR) — the rate at which it lends to commercial banks —  constant for the fifth consecutive time, having last slashed the rate in May last year citing the need to rein in inflation, which continues to hover above the government’s target of five per cent.

“The committee concluded that the monetary policy measures had continued to deliver the desired price stability. However, overall inflation remained in the upper bound of the medium-term target of five per cent… The committee therefore decided to retain the CBR at 8.50 per cent to continue anchoring inflationary expectations,” said the Central bank Governor Njuguna Ndung’u.

This news came as the overall month-on-month inflation declined from 7.21 per cent in January to a six-month low of 6.86 per cent in February 2014.

The CBK said it was keeping an eye on short-term interest rates and that it would increasingly deploy liquidity management tools in the market in the coming months.

“The expected normalisation of government deposits over the rest of the fiscal year would lead to more widespread use of the CBK liquidity management operations,” said Prof Ndung’u.