The Monetary Policy Committee (MPC) recently announced its decision to keep the Central Bank Rate (CBR) steady at 10.5 percent. To begin with, the MPC expects that inflation will stay within the targeted range, thanks to lower food prices and improved supply conditions. They also anticipate a decrease in non-food non-fuel (NFNF) inflation, which suggests a reduction in underlying inflationary pressures.
The committee also considered the impact of the monetary policy tightening implemented in June, which aimed to stabilize inflation expectations which they still believe has an influence on the country’s economy.
The Central Bank of Kenya governor, Kamau Thugge, mentioned that they will keep a close watch on the consequences of these policy actions and monitor global and domestic economic developments. The committee is prepared to take further action if necessary.
During the meeting, the MPC took into account global uncertainties, ongoing inflationary pressures, rising international oil prices, a subdued global economic outlook, geopolitical tensions, and responses by authorities worldwide to these challenges.
The CBK’s foreign exchange reserves continue to provide ample cover and act as a buffer against potential short-term foreign exchange market shocks.
Furthermore, in the 12 months leading up to August 2023, there was a slight increase in goods exports, with growth observed in tea and manufactured exports. This growth in tea exports can be attributed to increased demand from traditional markets, while the rise in manufactured exports is due to strong regional demand.
On the other hand, imports declined during the same period, mainly due to lower imports of infrastructure-related equipment, manufactured goods, oil, and chemicals.
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Additionally, there has been a significant improvement in tourist arrivals, with a significant increase observed in the first eight months of 2023 compared to the previous year.