Kenya: MPC retains CBK rate at 10.5%

The Monetary Policy Committee of Kenya has decided to retain the Central Bank Rate at 10.50 per cent during its recent meeting on October 3rd, 2023. The decision was based on the committee's observation that inflation is expected to remain within the target range. The committee highlighted that lower food prices with expected improved supply have contributed to this stable inflation outlook. Governor of the Central Bank of Kenya, Kamau Thuge, emphasized that overall inflation has remained within the CBK's target range, with non-food, non-fuel inflation expected to decline, signaling easing underlying inflationary pressures. The impact of the monetary policy tightening implemented in June 2023 to anchor inflation expectations is still being felt in the economy. The committee expressed its readiness to take further actions if necessary, closely monitoring policy measures and developments in the global and domestic economy. The next meeting is scheduled for December 2023. Globally, inflation rates in advanced economies have decreased but remain above target levels due to core inflation pressures and high energy costs. In the US, inflation spiked in August 2023 due to increased energy prices influenced by rising international oil prices. India experienced a sharp rise in inflation driven by elevated food prices, while China's inflation remained low due to weak domestic demand. Core inflation in major economies persists due to tight labor markets and rising prices in the services sector. Global commodity prices have been below peak levels of 2022, with oil prices on the rise. Factors such as Saudi Arabia and Russia extending production and export cuts have influenced oil prices. Food inflation globally has declined from 2022 peaks, except for items like sugar and rice. The global economic outlook remains weak, with advanced economies experiencing the impact of monetary policy tightening, combined with weakened demand in China and the Eurozone, and geopolitical tensions. However, amidst the challenging global landscape, Kenya's real GDP growth is anticipated to remain robust in 2023. The IMF projects a global growth slowdown from 3.5 percent to 3 percent in 2023, with a forecasted 3 percent growth for 2024. Advanced economies like the UK and Eurozone are expected to see significant growth deceleration, while emerging markets and developing economies are projected to maintain stability. In Kenya, growth is forecasted to accelerate from 4.8 percent to 5 percent in 2023, with the Central Bank expressing even more optimism by expecting a growth rate of 5.5 percent. Looking at domestic inflation, there has been slight movement in September 2023, with overall inflation increasing marginally from 6.7 to 6.8 percent, driven by a slight uptick in food prices. Fuel inflation displayed a slowdown, while non-food, non-fuel inflation remained steady. The Central Bank of Kenya continues to keep a close watch on both global and domestic economic factors to ensure stable inflation and sustainable economic growth.