Kenya’s central bank rate decision



NAIROBI, November 29 (Reuters) – NAIROBI, November 29 (Reuters) – Kenya’s central bank on Monday kept its key rate (KECBIR = ECI) at 7.0%, the bank’s monetary policy committee said.

Below is the Monetary Policy Committee’s full statement on the decision:


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The Monetary Policy Committee (PMC) met on November 29, 2021, amid a global COVID-19 (coronavirus) pandemic, continued deployment of vaccination programs, others

measures taken by authorities around the world to contain its spread and impact, and emerging developments regarding a new variant of COVID-19. The MPC considered the implications and

results of measures implemented to mitigate the negative economic effects and financial disruption of the pandemic.

• Headline inflation fell to 6.5% in October 2021 from 6.9% in September, mainly due to lower fuel prices. Fuel price inflation fell to 9.6 percent in October from 11.1 percent in September, reflecting the impact of government measures to stabilize fuel prices. Food inflation remained high at 10.6 percent in October, mainly due to the impact of the

rain on some foods. Inflation is expected to remain within the target range in the near term with moderate demand pressures.

• The global economy continues to strengthen, largely supported by the ongoing vaccine rollout, improved business investment and consumer spending, and an accommodative policy

measures. However, the pace of recovery remains uneven across countries, in part due to uneven vaccine distribution, varying supply chain constraints, and disparate policy support measures. In addition, inflation in advanced economies and emerging markets has risen sharply, in part driven by rising global oil prices, and raising concerns about the policy response.

• Recently released GDP data indicates that the Kenyan economy rebounded strongly in the first half of 2021, mainly reflecting the recovery in economic activity following the easing of restrictions related to COVID-19. In particular, real GDP increased by 10.1% in the second quarter of 2021 against a contraction of 4.7% in the second quarter of 2020. This reflects the strong recovery of the service sector, particularly in transport and storage, education. , information and communication, wholesale and retail trade and improving the performance of the construction and manufacturing sectors. Main economic indicators point to a further recovery in the second half of 2021, also boosted by the full reopening of the economy.

Economic growth is expected to remain strong in 2022, with the normalization of domestic economic activities, as well as a loosening of global supply chain constraints and stronger global demand.

• The three surveys conducted for the MPC meeting – Private Sector Market Perceptions Survey, CEO Survey and Hotel Survey – revealed the highest level of optimism about the outlook for economic growth since March 2021. Interviewees attributed this optimism to a sustained recovery in different sectors, the lifting of the curfew, the reduction in the number of COVID-19 infections and the increase in vaccinations, continued government infrastructure spending and the global economic recovery which should stimulate export demand. Additionally, respondents expect consumer demand to increase during the holiday and back-to-school seasons. Nonetheless, as concerns about the pandemic eased, those interviewed remained concerned about the dry weather conditions and heightened political activity.

Hotel investigation confirmed continued recovery

with virtually all of the surveyed hotels now operational, the highest levels of bed occupancy and reservations since the start of the pandemic, and an increase in catering and conference services.

• Exports of goods remained strong, increasing by 10.8% during the period January to October 2021 compared to a similar period in 2020. For the same period, export earnings

horticultural and manufactured products increased by 19.1% and 35.3%, respectively, compared to a similar period in 2020. However, the revenue from tea exports decreased by 6.2%.

percent, partly due to the impact of accelerating purchases in 2020. Imports of goods increased by 23.6% during the period January to October 2021 compared to a similar period in 2020, mainly reflecting the increase in imports of petroleum and other intermediate goods. Receipts from tourism and transport services have improved as international travel continues to recover. Remittances remained robust at $ 337.4 million in October 2021, and were 20.1% higher during the period January to October 2021 compared to a similar period in 2020. The current account

The deficit is estimated at 5.4% of GDP in the 12 months leading up to October and is projected at 5.2% of GDP in 2021.

• The CBK’s foreign exchange reserves, which currently stand at USD 8,768 million (5.36 months of import coverage), continue to provide adequate coverage and a buffer against short-term shocks in the future.

the foreign exchange market.

• The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios. The ratio of gross non-performing loans (NPLs) to gross loans stood at 13.6% in October from 13.9% in August. Refunds and recoveries were noted in the trade, manufacturing, personal and household, and financial services sectors. Banks started

integrating climate-related risks into their strategy, governance, risk management and disclosure frameworks. This follows the publication by the CBK of Guidance on Climate-Related Risk

Management in October. The Guide aims to improve banks’ consideration of climate-related risks while leveraging business opportunities in the transition to a low-carbon, climate-resilient economy. Banks have also started raising additional capital with the intention of supporting lending in 2022 and funding emerging opportunities in Kenya and the


• Credit growth to the private sector rose to 7.8% in October 2021, from 7.0% in August. Strong credit growth was observed in the following sectors: manufacturing (10.9

percent; transport and communications (9.6%), business services (8.2%) and durable consumer goods (16.5%). The number of loan applications remained strong in October,

reflecting the improvement in demand with the increase in economic activities. Progress was noted with regard to loans under the credit guarantee system which was operationalized in October 2020.

• The Committee noted the progress made in the implementation of the state budget for the fiscal year 2021/22, in particular the rebound in revenue performance with the resumption of economic activities.

and improving the business environment. The deployment of the economic stimulus program and the economic stimulus strategy was also noted and should continue to stimulate domestic demand.

The Committee noted that inflation expectations remained anchored within the target range and that key economic indicators continued to perform well. The MPC concluded that the current stance of accommodative monetary policy remains appropriate and therefore decided to keep the central bank rate (CBR) at 7.00%.

The MPC will closely monitor the impact of policy measures, as well as developments in the global and national economy, and stands ready to take further action if necessary. The

The committee will meet again in January 2022, but remains ready to meet earlier if necessary.

Dr Patrick Njoroge


November 29, 2021

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Editing by George Obulutsa

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