The committee maintained its interest rate at 8.5 per cent for the eleventh session in a row despite Kenya’s month-on-month inflation rate rising by 0.08 per cent to 5.61 per cent in February. Nonetheless, inflation is still lingering within the government target.
“Overall month-on-month inflation declined from 6.02 per cent in December 2014 to 5.53 per cent in January 2015 mainly reflecting continued moderation in the prices of fuel, but has risen slightly as predicted to 5.61 per cent in February 2015,” CBK said in a statement.
According to the bank, during the period under review the non-food and non-fuel inflation declined by 0.12 per cent to 3.43 per cent. This implied that there were no ‘significant demand-driven inflationary threats to the economy’.
“The monetary policy measures, coupled with the favourable impact of lower international oil prices continued to support price stability. However, the divergent monetary policy paths taken by the major advanced economies may cause volatility in the global foreign exchange markets,” CBK said.
Moreover, the committee observed that the shilling has remained resilient despite instability in the global foreign exchange markets.
“The Kenya Shilling has continued to benefit from the strong investor confidence recently boosted by the approval of the International Monetary Fund (IMF) supported precautionary facility,” the committee stated.
According to Daniel Kuyoh Research Analyst at Kingdom Securities, the MPC made a good move in by maintaining the lending rate.
“One of the reasons I think they maintained the rate is because the Kenya shilling has been depreciation but not as other regional currencies against the US dollar. So based on that I was sure they would maintain it,” Kuyoh said.
Meanwhile, this is the last meeting that will be presided by the CBK Governor Njuguna Ndungu whose height at the helm comes to an end in March.
“The MPC will continue to monitor the key macroeconomic aggregates and any emergent risks from the external and domestic economies that may impact on price stability,” the governor said.