Kenya’s central bank paused its rate-cutting cycle this Wednesday, keeping its benchmark lending rate at 8.75% to monitor second-round effects from a surge in global energy prices triggered by the Iran war.
The decision follows 10 consecutive rate cuts and was in line with the forecast in a Reuters poll of economists.
The bank’s last rate decision came in mid-February, more than two weeks before the United States (US) and Israel launched strikes on Iran, prompting Tehran to retaliate.
“The Committee concluded that the current monetary policy stance remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable,” the Central Bank of Kenya said in a statement.
“The Monetary Policy Committee assessed that there is a need to monitor any second-round effects of the recent increase in international oil prices on overall inflation.”
Annual inflation stood at 4.4% in March, slightly higher than February’s 4.3% reading and within the government’s preferred 2.5%-7.5% band.
The central bank lowered its growth forecast for this year to 5.3% from a previous projection of 5.5%, saying the Middle East conflict posed risks to key sectors of East Africa’s biggest economy.
It now forecasts a current account deficit of 3.0% of gross domestic product in 2026, higher than a previous projection of 2.2%, also because of the Iran conflict.
Global oil prices tumbled on Wednesday after US President Donald Trump said he had agreed to a two-week ceasefire with Iran, but they remain far higher than before the war started.
–Reuters–
