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CBK Governor Dr. Patrick Njoroge/CFM

Kenya

CBK says Kenya’s Economy is on the Road to Recovery, Retains Benchmark Rate at 7pc

NAIROBI, Kenya, Jan 27 – Central Bank of Kenya’s Monetary Policy Committee has retained the Central Bank Rate at 7 percent for the sixth time in a row, saying the package of policy measures implemented since March 2020 was having the intended effect on the economy.

 

The retention comes amid a finding by CBK revealing a recovery of the economy, particularly in the fourth quarter of 2020, following disruptions witnessed earlier in the year occasioned by the coronavirus pandemic.

 

According to the Patrick Njoroge-led committee, the recovery is supported largely by strong performance in the agriculture and construction sectors, resilient exports, and continued recovery in manufacturing and services.

 

The committee also expects the economy to rebound strongly in 2021, supported by a recovery in the services sectors, particularly education, manufacturing, resilient agriculture, and the ongoing policy support through the government’s economic recovery plan.

 

This comes even as the January 2021 MPC Private Sector Market Perceptions Survey revealed expectations of strong economic activity over the next two months, and greater optimism on the economic prospects in 2021.

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Respondents of the survey attributed the improvement largely to the reopening of all learning institutions, expectations of acquiring a COVID-19 vaccine, and the implementation of the Economic Stimulus Programme by the Government.

 

Others include the resumption of most businesses that had stalled due to the pandemic and strong agricultural production.

 

“However, uncertainties were noted with regard to the increase in COVID-19 infections globally and the emergence of new variants,” Njoroge, who is also CBK’s Governor said in a statement.

 

The announcement of the benchmark lending rate also comes amid a well-anchored inflation rate in the last few months.

 

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In December, for instance, month-on-month overall inflation stood at 5.6 percent compared to 5.3 percent in November 2020.

 

The committee expects inflation to remain within the target range in the near term, supported by lower food prices and muted demand pressures.

 

“The recently introduced tax measures are expected to have a modest impact on overall inflation.”

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