Central Bank retains base rate as inflation falls

What you need to know:

  • CBK retained the indicative lending rate at 8.5 per cent.
  • Governor Njunguna Ndung’u said current forecast indicates that inflation was moving towards its 5 per cent target.

The Central Bank on Tuesday retained the indicative lending rate at 8.5 per cent amidst falling inflation and strengthening of the shilling.

Monetary Policy Committee chairman and bank Governor Njunguna Ndung’u said current forecast indicates that inflation was moving towards its 5 per cent target.

The overall month-on-month inflation declined from 6.60 per cent in September 2014, to 6.43 per cent in October primarily as an outcome of declines in the prices of most foodstuff and energy costs.

“The monetary committee decided to retain its policy stance by maintaining the rate at 8.50 per cent in order to continue anchoring inflationary expectations,” Mr Ndung’u said.

He said the regulator’s level of usable foreign exchange reserves increased from $6,376.95 million at the beginning of September to $7,116.3 million which is equivalent to 4.64 months of import cover at the end of October.

“The exchange rate remains stable despite short-term pressures arising from external events that has resulted in a flight to safety,” Mr Ndung’u said.