NAIROBI, Kenya July 27 -The Central Bank of Kenya(CBK) has retained the base lending rate at 7.5 per cent even as global inflation remains elevated.
The apex bank raised the rate from 7 per cent in May as an accommodative stance to the emerging inflationary pressures in the global economy.
In a statement after its Monetary Policy Committee(MPC) meeting on Wednesday, CBK Governor Patrick Njoroge noted that the global economic outlook has become more uncertain, despite the recent moderation in commodity prices.
“The Committee noted that its action of tightening monetary policy in May was timely in anticipating emerging inflationary pressures, and its impact was still transmitting through the economy,” Njoroge said
He noted that the action was complemented by an additional package of fiscal measures by the Government to moderate the prices of specific items for instance the lowering of the cost of maize flour to Sh100.
Overall inflation rose to 7.9 percent in June 2022 from 7.1 percent in May, due to increases in food and fuel prices, according to the Kenya National Bureau of Statistics (KNBS).
Food inflation increased to 13.8 per cent in June from 12.4 per cent in May, mainly on account of prices of maize following reduced supply attributed to depressed rains, and edible oils and wheat products due to the impact of supply chain disruptions.
Fuel inflation rose to 10.0 per cent in June from 9.0 per cent in May, driven by increases in fuel and cooking gas
(LPG) prices on account of higher international oil prices.
The three surveys conducted ahead of the MPC meeting—Private Sector Market Perceptions Survey, CEOs Survey, and the Survey of Hotels—revealed sustained optimism about business activity and economic growth prospects for 2022.
The optimism was attributed to Government spending on key infrastructure projects, continued post Covid-19 recovery, and expected pickup in economic activities after the elections.
Nevertheless, respondents remained concerned about high inflation, the impact of the war in Ukraine on commodity prices, supply chain disruptions, and the impact of the depressed rainfall on agricultural production.
Goods exports have remained strong, growing by 11.2 per cent in the 12 months to June 2022 compared to a similar period in 2021.
Imports of goods increased by 21.7 per cent in the 12 months to June 2022 compared to an increase of 3.6 per cent in the 12 months to June 2021, mainly reflecting increased imports of oil and intermediate goods.
The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios.
The ratio of gross non-performing loans (NPLs) to gross loans stood at 14.7 per cent in June 2022, compared to 14.1 percent in April.
Growth in private sector credit increased to 12.3 percent in June 2022, from 11.5 percent in April.
“The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary,” Njoroge said.
He added that the Committee will meet again in September 2022, but remains ready to re-convene earlier if necessary.
