Kenya’s central bank is focused on taming volatility in the exchange rate and has no optimal level for the shilling, its governor Patrick Njoroge told a local television station.
The shilling is off a 3-1/2-year low of 103.85/95 hit in mid-July, but is still down 11 percent against the dollar in the year to date.
The central bank’s Monetary Policy Committee — due to meet next on Aug. 5 — has raised its benchmark lending rate by 3 percentage points since June, to 11.5 percent, to offset the weakening shilling.
“The real concern for us is the volatility of the exchange rate, how much they move. We don’t have an optimal level of the exchange rate,” Njoroge said in comments broadcast on NTV Kenya late on Monday.
The bank has raised its Kenya Banks Reference Rate (KBRR), against which banks price their commercial loans, to 9.87 percent from 8.54 percent and increased its mopping up of excess shilling liquidity from the money markets, a move that makes it expensive to hold dollars.
Earlier on Monday, Njoroge told the Senate’s Finance Committee the measures taken would have an effect in time.
“We are cautiously optimistic and we need to take further measures to support fiscal order in order to provide confidence for the private sector,” Njoroge was quoted saying in the Daily Nation newspaper, without giving more details.
For most of this year the shilling has been under pressure from a globally stronger dollar, falling export proceeds, especially from tourism, and a widening current account deficit.