Central Bank of Kenya (CBK) defied anticipations as it retained interest rates at 10.5 per cent in a decision released yesterday while also indicating a weak global economic outlook that might force one more tightening before wrapping up the year. The decision was attributed to an improved core inflation rate, which hit 6.8 per cent in September, falling within the government’s targeted range of between 2.5 and 7.5 per cent. This is the second time in a row that the Monetary Policy Committee (MPC) left the Central Bank Rate (CBR) unchanged.

The apex bank indicated that it expects an improved food supply supported by ongoing harvest and a tax-free import window opened by the government. “In view of these developments, the MPC decided to retain the Central Bank Rate (CBR) at 10.50 per cent,” CBK governor Kamau Thugge (pictured) said in the MPC statement.

Policy meeting

A survey of the agriculture sector by the CBK in mid-September ahead of the policy meeting showed that the prices of key food items, particularly maize – the country’s staple food – are expected to decline in the coming months.

Food inflation increased to 7.9 percent in September from 7.5 percent in August, largely on account of increases in the prices of a few key vegetables, particularly onions, Irish potatoes, cabbages, spinach, kale.

Market Perceptions Surveys further revealed improved optimism about business activity and economic growth prospects for the next 12 months..