Kenya: CBK projects forecast a rise in inflation due to increased fuel costs


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Nairobi – The Central Bank of Kenya (CBK) has left its key interest rate at 7 percent for the eleventh time in a row, citing the appropriateness of the “current expansive monetary policy stance”.

However, CBK’s Monetary Policy Committee (MPC), which held its meeting on Wednesday, noted that inflationary pressures are expected to rise in the near future, mainly driven by rising fuel and food prices.

“Inflationary pressures are expected to increase in the near future, mainly due to an increase in fuel and food prices and the impact of the recently implemented measures,” said MPC, which is charged with regulating the money supply and interest rates.

Headline inflation was 6.6 percent in August, compared with 6.5 percent in July.

However, the regulator said inflation is expected to stay within the target range of 7 percent with subdued demand pressures.

CBK added that the economy is expected to recover in 2021, aided by the continued reopening of the service sector, recovery in manufacturing and stronger global demand.

The robust development of the construction, manufacturing, education, real estate, and transport and storage sectors were cited as the most important pillars of the economy.

The MPC’s survey also found that the banking sector remained stable and resilient, with strong liquidity and equity ratios.

“The ratio of gross non-performing loans (NPL) to gross loans was 13.9 percent in August compared with 14.0 percent in June,” the statement added.

Repayments and recoveries were recorded in the tourism, catering and hotel and construction sectors.

As a result, private sector credit growth rose from 6.1 percent to 7.0 percent in August 2021.

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