CBK warns of expected rise in inflation, retains lending rates at 9 percent

Alice Njoroge (left) from Insurance Regulatory Authority and Dr. Freshia Mugo (centre) from Capital Markets Authority looks on as Central Bank of Kenya Governor Dr. Patrick Njoroge (right) address delegates during the opening of the 11th retreat of the board of directors of the financial sector regulators dubbed "Regulators role in development and regulations of non-conventional finance" at the Serena Beach Resort, August 29, 2018. [PHOTO BY GIDEON MAUNDU/STANDARD].

The Central Bank of Kenya’s Monetary Policy Committee has retained the Central Bank Rate at 9 percent.

The Committee has also said that it will continue monitoring any developments in global and domestic economy and will take necessary measures in accordance with changes.

A statement from CBK Governor Dr Patrick Njoroge reads: “The Committee noted that inflation expectations remained well anchored within the target range, but concluded that there was need to monitor the second-round inflationary effects arising from the VAT on petroleum products, and any perverse response to its previous decisions. The Committee therefore decided to retain the CBR at 9.00 percent.”

It has allayed fears that inflation rates in July and August which were 4.0 percent and 4.4 percent respectively were favourable.

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This has been attributed to lower food prices over the said period. Nonetheless, the Committee has equally raised alarm that the country faces difficult times especially with the entry of 8 percent Value Added Tax on petroleum products.

“Overall inflation is expected to rise in the near term, following the implementation of VAT on petroleum products in September 2018 and its impact on other prices, as well as increases in international oil prices,” CBK statement further reads.

It however notes that inflation will be within manageable range owing to lower food prices attributable to favourable weather.

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Central Bank of KenyaMonetary Policy CommitteeCentral Bank Rate9 percentDr Patrick NjorogeInflation8 Perecent VAT on Petroleum