NAIROBI, Jan. 30 (Xinhua) -- The Central Bank of Kenya (CBK) on Monday retained its benchmark lending rate at 10 percent due to the expected stability of the inflation rate in the short term.
The CBK's Monetary Policy Committee (MPC) said that the committee will continue to closely monitor developments in the domestic and global economies and is ready to take additional measures as necessary.
"The MPC has therefore decided to retain the Central Bank Rate (CBR) at ten percent in order to anchor inflation expectations," CBK Governor Dr. Patrick Njoroge said in statement.
With the CBR rate at ten percent, the commercial bank's maximum lending rate will be 14 percent, while the minimum bank deposit rate stands at 7 percent.
The statement comes after the MPC met in order to review the outcome of its previous policy decisions as well as recent economic developments.
The Committee noted that Kenya faces increased uncertainties due to the prevailing drought conditions as well as risks in the global markets.
Month-on-month overall inflation declined to 6.4 percent in December from 6.7 percent in November 2016, remaining within the government target range.
According to the chairman, the decline reflected in part the waning effect of the excise tax that was implemented in December 2015.
Njoroge said that the performance of the economy in the third quarter of 2016 was robust, supported by macroeconomic stability, public investment in infrastructure, lower energy prices, and the recovery of the tourism sector.
The CBK indicated that the foreign exchange market remains relatively stable. "This is supported by a narrowing of the current account deficit, from 6.8 percent of GDP in 2015 to an estimated 5.5 percent in 2016," he noted.
The improvement in the current account deficit was largely as a result of lower import bill of petroleum products, machinery and transport equipment.
Additionally, foreign exchange levels benefited from improved horticulture and tea production, higher tourism receipts, and resilient Diaspora remittances.
