(Xinhua) -- The Central Bank of Kenya (CBK) on Monday maintained the benchmark lending rate at 10 percent in order to anchor inflation expectations.
CBK Governor Patrick Njoroge, who chaired the Monetary Policy Committee (MPC), said that an MPC Private Sector Market Perception Survey conducted in September shows that inflation was expected to decline due to lower food prices occasioned by the expected short rains and government subsidies on some food items.
"The committee has therefore concluded that the current policy stance remains appropriate," Njoroge said in a statement. "However, the CBK will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary."
The MPC met on Monday to review the outcome of its policy decisions and recent economic developments against a backdrop of general macroeconomic stability, a prolonged election period, and continued uncertainties in the global economy.
Month-on-month overall inflation rose to 8 percent in August, from 7.5 percent in July, reflecting limited supply of some food items, particularly tomatoes, following transport difficulties in the immediate period after the general elections.
The governor said that non-food-non-fuel (NFNF) inflation has remained stable below 5 percent, suggesting that demand pressures in the economy were muted.
The foreign exchange market has remained relatively stable, supported by resilient tea and horticultural exports, diaspora remittances, and a strong recovery in tourism, Njoroge said.
The 12-month current account deficit widened slightly to 6.4 percent of gross domestic product (GDP) in July 2017, from 6.2 percent in May, largely due to short-term import demand for cereals and sugar, and Standard Gauge Railway (SGR) related transport equipment, he said.
"However, the current account deficit is expected to narrow to 5.8 percent of GDP by December 2017 as the bulk of SGR-related imports are completed, while the expected favorable weather conditions will improve food production and reduce reliance on imports," Njoroge said.
