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CBK calls early quarterly meeting amid inflation

NAIROBI, Kenya, Sep 5 – The Central Bank’s Monetary Policy Committee is scheduled to hold its quarterly meeting next week, about two weeks earlier than the traditional last week of every third month.

At a press briefing on Monday, Central Bank Governor Prof Njuguna Ndung’u indicated that the MPC would meet on September 14.

The reason for bringing forward the quarterly meetings was not immediately clear, but it might be related to the current rise in inflation levels being witnessed in the country, putting a strain o the economy.

The meeting comes barely two weeks after Finance Minister Uhuru Kenyatta said there was a need to restore monetary stability and arrest inflation, which he said was way above the target range and was causing shocks in the economy.

August inflation rose for the eight consecutive time hitting 16.67 percent further pushing up the cost of living in the country.

Prof Ndung’u however said the coming short rains might ease some of the pressure, especially in food growing regions, and relieve the current food supply constraints.

With inflation way above the government’s target of keeping it at five percent, Prof Ndung’u was optimistic that it might start coming down.

“It’s still too early to tell whether inflation had reached its ceiling but what I can say for sure is that we can see things starting to improve,” Prof Ndung’u said.

The CBK has been under immense pressure to tighten monetary policy and reign in runaway inflation as well as weakening shilling.

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The rise in the cost of living has also gained momentum from a weakening of the shilling, which has increased the cost of imported goods and complicated the management of monetary policy.

A fragile growth and a build-up of public debt to more than half the gross domestic product has made the Kenyan situation much more complex for the Central Bank to step in fully to adjust monetary policy.

These and the fact that the surge in price has been mostly attributed to supply side shortages outside the province of monetary policy have made it difficult for CBK to discharge its mandate of keeping prices stable and spurring growth.

At its last meeting, the MPC left its benchmark lending rate unchanged at 6.25 percent.

Despite the tough times, Prof Ndung’u believes the country’s markets remain stable and that the economy would stabilise once supply side constraints of basic foods such as maize, sugar and fuel had been sorted.

“This is the same situation we were in 2009 and it was even worse because of the global financial crisis. Kenya is a stable country with sound markets and once inflation starts to come down we will see things settling down,” he said.

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