MPC holds benchmark rate at 11.5pc amid market stability

Central Bank of Kenya’s rate-setting committee has maintained the policy benchmark at 11.5 per cent amid stability in the exchange rate and falling interest rates on government paper.

The Monetary Policy Committee (MPC) has held the rate steady since it was first fixed at the same level in July following weeks of turbulence in the exchange rate.

The shilling has been stable at 102 units to the dollar for several weeks after weakening to four-year lows in early September. On September 8, the shilling fell to just above 106 units to the greenback, underlining the pressure that the currency market was experiencing.

“The committee concluded that the monetary policy measures in place are appropriate to maintain market stability and anchor inflation expectations. The MPC therefore decided to retain the CBR at 11.50 per cent,” said Patrick Njoroge, chairman of the MPC and Central Bank governor.

The shilling has been battered by international forces, especially the appreciation of the dollar against other currencies, following indications that the Federal Reserve is likely to raise the policy rate before the end of the year after holding it at near zero for years.

The other factor contributing to the weakness of the shilling is the huge current account deficit that has hovered around 10 per cent of the gross domestic product for a while.

Market liquidity has improved in November after having been tight in October.