Central bank holds main lending rate at 9.0 per cent

Central bank held its benchmark lending rate at 9.0 per cent on Wednesday, with the monetary policy committee saying inflation expectations were within the target range and the economy was operating close to its potential.

It is the sixth time in a row the bank has held the rate.

A poll of 15 analysts and economists taken last week showed the rate was expected to be left unchanged.

“However, there is need to be vigilant on the possible effects of the recent increases in fuel prices, the ongoing demonetisation, and the increased uncertainties in the external environment,” the bank said in a statement.

It is the first monetary policy committee meeting since Governor Patrick Njoroge was given a second four-year term in office.

Inflation rose slightly to 5.70 per cent year-on-year in June from 5.49 per cent a month earlier, data from the statistics office showed, staying within the government’s preferred band of 2.5 per cent-7.5 per cent in the medium term.

The government forecasts the economy will expand by 6.3 per cent in 2019, the same rate as a year earlier.

The Kenya National Bureau of Statistics said in June the economy grew 5.6 per cent year-on-year in the first quarter, from 6.5 per cent in the same quarter last year.

The bank said the current account deficit was expected to narrow to 4.5 per cent of GDP in 2019 from 5.0 per cent last year. In May, the bank had forecast current account deficit would narrow to 4.8 per cent of GDP in 2019.