The Central Bank of Kenya (CBK) has retained its benchmark lending rate at 10.5%. In a statement on Tuesday, the CBK’s Monetary Policy Committee (MPC) noted that inflation is expected to remain within the target range, supported by lower food prices with the expected improved supply.
The Monetary Policy Committee (MPC) meeting came against a backdrop of continued global uncertainties, persistent inflationary pressures, increase in international oil prices, a weak global growth outlook, geopolitical tensions, and measures taken by authorities around the world in response to these developments.
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The MPC noted that Kenya’s overall inflation remained broadly unchanged at 6.8% in September 2023, compared to 6.7% in August, which is within the government’s target range. Food inflation increased to 7.9% in September from 7.5% in August, largely on account of increases in the prices of a few key vegetables particularly onions, Irish potatoes, cabbages, spinach, kales (sukuma wiki), and tomatoes.
Prices of key non-vegetable food items particularly maize and wheat flour declined following improved supply attributed to the ongoing harvests and government measures to zero-rate key food imports. Fuel inflation remained elevated at 13.1 percent in September, reflecting the impact of the rise in international oil prices.
Additionally, the MPC noted that goods exports increased marginally in the 12 months to August 2023, growing by 0.5% compared to a similar period in 2022. Receipts from tea and manufactured exports increased by 4.5% and 23.2%, respectively. The increase in tea export receipts reflects higher prices due to demand from traditional markets, while the higher manufactured exports receipts reflect strong regional demand.
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On the other hand, Imports declined by 11.9% in the 12 months to August 2023 compared to a growth of 16.0% in a similar period in 2022, mainly reflecting lower imports of infrastructure related equipment, manufactured goods, oil, and chemicals.
Tourist arrivals improved by 34% in the eight months to August 2023 compared to a similar period in 2022 and increased by 55% in August 2023 compared with August 2022.
The MPC observed that Non-food non-fuel( NFNF) inflation was expected to decline, indicative of easing underlying inflationary pressures. The Committee further assessed that the impact of the tightening of monetary policy in June 2023 to anchor inflationary expectations was still transmitting in the economy.
The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take further action as necessary. The Committee will meet again in December 2023.
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