Central Bank of Kenya (CBK) on Tuesday kept the base lending rate unchanged at nine per cent, citing the drop in inflation last month as falling food prices offset the rise in fuel costs following the introduction of VAT on petroleum products.
Kenya’s inflation fell to 5.5 per cent in October from 5.7 per cent in September, and with fuel prices expected to moderate in the next two months due to lower crude prices in the international market, inflationary pressure is likely to abate even further.
The CBK’s monetary policy committee (MPC) also said that the economy is operating close to its potential, hence the current policy stance remains appropriate to anchor this growth.
“The inflation rate fell following decreases in food prices which offset the increase in energy prices and transport costs following the implementation of VAT on petroleum products in September 2018. Non-food-non-fuel (NFNF) inflation remained below five per cent, indicating that there were no demand pressures in the economy,” said CBK governor Patrick Njoroge in a statement following the MPC meeting.
In the first half of the year, the economy grew at six per cent, compared to 4.7 per cent in the first half of 2017.
The MPC added that there are no immediate concerns about the exchange rate, citing adequate forex cover and healthy inflows from diaspora remittances, tea, tourism and horticulture.
