Central Bank of Kenya keeps interest rate at 13% as inflation eases
TLDR
- The Central Bank of Kenya maintains interest rate at 13% signaling a possible reduction in borrowing costs amidst lower inflation and stronger Kenyan shilling.
- Headline inflation decreases to 5.7%, a two-year low, driven by lower prices of key food items like maize flour, wheat flour, kales, spinach, and cabbages.
- Despite favorable economic indicators, Monetary Policy Committee (MPC) remains cautiously optimistic about Kenya's economic outlook.
The Central Bank of Kenya (CBK) has maintained its interest rate at 13%, indicating a potential shift towards reducing borrowing costs amid declining inflation and a strengthening Kenyan shilling against major currencies.
In its recent announcement, the apex bank highlighted a decrease in headline inflation to 5.7%, the lowest in two years, attributed to lower prices of various food items such as maize flour, wheat flour, kales, spinach, and cabbages.
Despite the shilling's appreciation against the dollar and inflation easing within the CBK's target range of 2.5% to 7.5%, the Monetary Policy Committee (MPC) remains cautiously optimistic about economic conditions.
Key Takeaways
The Kenyan shilling has experienced a rally, appreciating by 18% against the dollar, effectively addressing inflationary pressures stemming from imports. The CBK reported the shilling's exchange rate against the dollar at KES 131.48, a significant improvement from its record high of KES 160.18 in February. This remarkable shift represents a 17.9% appreciation over the past month alone. The CBK attributes this positive development to robust economic performance, particularly in agriculture, the service sector, and ICT. Additionally, the March 2024 Agriculture Sector Survey foresees a decline in food prices over the next three months, supported by favorable weather conditions, a stronger shilling, and decreasing fuel prices.
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