CBK leaves benchmark rate unchanged at 8.5pc
Tuesday July 09 2013
The Central Bank of Kenya headquarters in Nairobi. CBK has held its benchmark lending rate steady at 8.5 per cent. FILE
Kenya’s banking regulator on Tuesday held its benchmark lending rate steady on risks arising from the country’s high current account deficit and instability in international markets which could affect local price levels.
The Central Bank of Kenya (CBK) said that it would keep the Central Bank Rate (CBR) at 8.5 per cent to provide time for previous Monetary Policy Committee decisions to work through the economy.
In May this year, the banking regulator cut the CBR by one percentage point from 9.5 per cent citing low pace at which prices of basics have been going up and the shilling’s continued stability against major currencies.
“These risks emanate mainly from the high current account deficit, and the current instability in the Middle East and North Africa (MENA) and Eurozone which are a threat to the general stability of prices,” said Prof Njuguna Ndung'u, governor, CBK in a statement.
He said that overall and non-food-non-fuel month-on-month inflation rates remained within the allowable margin of 2.5 per cent on either side of the Government’s medium-term target of 5 per cent.
The Kenya National Bureau of Statistics last month said that the pace at which prices of basics has been going up increased to 4.91 per cent in June from 4.05 per cent in May reflecting an increase in food prices.
Last week, Bank of Uganda left its benchmark rate unchanged at 11 per cent on the back of expectations of an increase in the inflation rate in the next two to three months after reducing it by one percentage point the previous month from 12 per cent.
BoU’s governor, Prof Emmanuel Tumusiime-Mutebile, said that even though there are expectations that prices of basic goods and services could rise at a faster pace in the coming months, the rate will then drop towards the regulator's medium term policy target of 5 per cent by June next year.
Prof Ndung'u said that the gradual easing of the monetary policy stance adopted by the monetary committee coupled with sustained open market operations has resulted in improved liquidity conditions and stability in the interbank market.