Nairobi, Kenya – Kenya’s Central Bank has decided to keep its benchmark interest rate at 8.75 percent, pausing the easing cycle that had been in place for nearly two years, as policymakers assess the potential impact of the ongoing US-Israeli conflict involving Iran.
Okay News reports that the Monetary Policy Committee observed that headline inflation stood at 4.4 percent in March, slightly up from 4.3 percent in February. Governor Kamau Thugge stated that despite expected upward pressure from higher energy prices, overall inflation is anticipated to remain within the target range of 2.5 to 7.5 percent, aided by stable food prices and a broadly stable exchange rate.
The ongoing conflict in the Middle East has disrupted global supply chains, causing a sharp rise in energy prices and introducing greater risks to the global economic outlook. Kenya’s inflation is expected to remain within the target range for the short term, but the tension could test the upper limits due to rising fuel and food costs.
The central bank has revised its growth forecast for the economy to 5.3 percent, down from an earlier estimate of 5.5 percent. The current account deficit forecast has been adjusted to 3 percent of GDP from 2.2 percent, due to higher oil import bills, declining service receipts, lower remittances, and slower export growth.
Foreign exchange reserves stood at $13.7 billion in early April, sufficient to cover nearly six months of imports. This interest rate hold reflects cautious monitoring of external shocks while maintaining inflation within target.
