The central bank of Kenya (CBK) Monetary Policy Committee has maintained the benchmark rate unchanged at 7.5pc in the hope of abating rising inflation.
During the Thursday meeting, the CBK monetary policy committee said the decision to hike the Central Bank Rate (CBR) from 7pc to 7.5pc in May was timely as consumers battled the high cost of living amid rising commodity prices in the subsequent months.
Month-on-month inflation peaked at 7.9pc in June from 7.1pc in May, a five-year high following food and fuel price increases.
Food inflation rose to 13.8pc in June from 12.4pc in May as fuel inflation also surged to 10pc from 9pc over the same period due to an increase in pump and cooking gas prices on account of higher international oil prices.
“This action was subsequently complemented by an additional package of fiscal measures
by the Government to moderate the prices of specific items,” said Dr Patrick Njoroge, CBK Governor.
The rising cost of food and fuel has forced the government to rollout subsidy programs to stabilize fuel, fertilizer, and maize flour prices in a bid to cushion vulnerable households.
According to CBK Governor Dr Njoroge, these measures will help moderate the rate of inflation which has already breached medium-term targets.
CBK Rates seek to Maintain Inflation.
“Additionally, the recent waiver of import duties and levies on white maize, the subsidy on retail prices of sifted maize flour, and the recent reduction in VAT on LPG will further moderate domestic prices,” he said in a statement Thursday.
In a deal struck with cereal millers last week, consumers will continue buying a 2kg packet of maize meal at Ksh 100, until the 4-week food subsidy program concludes in October with expectations that long rains will shore up harvest and help lower unga prices.
Nonetheless, the committee expects domestic inflationary pressures in the near term to ease on account of cooling international commodity prices, mainly oil, wheat, and edible oils.