Kenya’s central bank has acted appropriately by tightening interest rates and its economy remains on track despite headwinds from rising global market volatility and local security challenges, the International Monetary Fund said on Wednesday.
Policymakers have raised the rate by a total of 300 basis points since June after the shilling weakened sharply against the dollar mainly due to expectations of a U.S. rate hike, lower export earnings and a surge in imports.
“Recent decisive steps by the central bank to tighten monetary policy are appropriate,” IMF Deputy Managing Director Min Zhu said after the Fund’s executive board completed its first review of Kenya’s $688 million precautionary IMF credit arrangement.
“These steps will help contain the impact of the recent shilling depreciation on domestic prices and anchor inflationary expectations. The central bank remains committed to refraining from intervening in the foreign exchange market except for smoothing excessive exchange rate volatility.”