The Central Bank of Kenya (CBK) has opted to maintain the interest rate at 13%, aiming to solidify recent economic gains. This decision comes after a period of interest rate increases that successfully curbed inflation to a desirable level.
Balancing Act: Inflation vs. Growth
Prioritizing Long-Term Stability
The MPC views holding the current interest rate as the most effective strategy to address these concerns. This move prioritizes long-term economic well-being by ensuring price stability and a secure exchange rate, even though it might burden borrowers in the short term.
Keeping a Watchful Eye
Governor Thugge emphasized that the MPC will closely monitor the effects of their policy decisions alongside developments in both the global and domestic spheres. They stand ready to take further action if necessary to fulfill their mandate.
Positive Signs on the Inflation Front
Kenya’s inflation rate held steady at 5.1% in May, compared to 5.0% in April. While recent flooding caused a slight increase in food inflation due to rising vegetable prices, other food items and fuel prices actually declined. Additionally, non-food, non-fuel inflation also showed a slight dip in May (3.4%) compared to April (3.6%), signifying the effectiveness of recent monetary policies.
Looking Ahead: A Stable Future
With a stabilized exchange rate, an improved food supply due to better weather conditions, and the ongoing influence of monetary policy, the overall inflation rate is expected to stabilize around the target range in the near future. The MPC expressed confidence that “inflation is expected to remain stable around the mid-point of the target range in the near term,” supported by the various positive factors mentioned earlier.