Connect with us

Hi, what are you looking for?

Capital Business
Capital Business
MPC chairman and Central Bank Governor Njuguna Ndung'u/FILE

Kenya

CBK keeps base rate at 18pc for sixth month

MPC chairman and Central Bank Governor Njuguna Ndung'u/FILE

NAIROBI, Kenya, Jun 5 – The Monetary Policy Committee (MPC) has chosen to retain the Central Bank Rate (CBR) at 18 percent for the sixth month running, citing the need to sustain stability in the face of external shocks.

Despite inflation easing further to 12.22 percent this month, the struggling shilling proved to be the deal breaker for the market’s high expectations for a cut. Last week the local unit hit a four-month low of Sh87.90 against the greenback.

Following its evaluation of its monetary policy stance from the previous month, the MPC concluded that the global foreign exchange markets witnessed a resurgence of turbulence in May 2012 mainly attributed to the instability in the Euro Zone, hence the decision to hold the CBR.

“As a consequence, the US Dollar has strengthened globally as investors shift from Euro to US dollar denominated assets. Several emerging market currencies and those in the region, including the Kenya shilling, weakened against the US dollar as a result of these developments,” MPC Chairman and Central Bank Governor Njuguna Ndung’u explained in a statement.

The recent support from the $600 million syndicated loan he added improved the CBK foreign exchange reserves position and provided a further cushioning against external shocks affecting the exchange rate.

However, with the shilling remaining vulnerable to external shocks due to the current account deficit that stood at 11.4 percent of GDP last month and the instability in the Euro Zone, pass-through effects to domestic inflation are a major factor that could further weaken exchange rate.

Although international crude oil prices declined, the oil import bill still continues to account for a large proportion of the current account deficit with local oil prices remaining high.

“Despite the enhanced Open Market Operations undertaken in May 2012, excess liquidity conditions have persisted in the market thereby posing a risk to demand driven inflation pressure and exchange rate stability,” Ndung’u added.

Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...