Kenya's central bank maintained its benchmark Central Bank Rate (CBR) at 8.50 percent, noting it was keeping a close eye on any impact on the shilling's exchange rate and domestic inflation from possible volatility in global foreign exchange markets in response to the divergent path of monetary policy in major advanced economies.
The Central Bank of Kenya (CBK), which has kept its benchmark rate steady since May 2013, said the favorable impact of lower oil prices helped support price stability, confidence in the country's economy remains strong and the shilling has continued to benefit from strong investor confidence that was boosted by the International Monetary Fund's (IMF) approval of a precautionary facility.
On. Feb. 2 the IMF's executive board approved a stand-by arrangement that amounted to a total of US$688 million that will allow the country's government access to funds to cushion any external shocks to the economy while economic reforms are being carried out.
The CBK said its stock of usable foreign exchange reserves amounted to US$7.224.19 billion as of Feb. 26, down from $7.424.7 billion at the end of December, but still a level that provides a "robust cushion" along with the IMF facility against any shocks that could trigger excess exchange rate volatility.
The shilling started depreciating against the dollar in October 2013 and was close to hitting 92 to the dollar - a level not seen since November 2011 - in late January before it reversed course. Today the shilling was quoted at 91.5 to the dollar, down about one percent since the start of the year.
Kenya's inflation rate rose slightly to 5.6 percent in February from 5.5 percent in January, a rise the central bank had expected.