Kenya's central bank held its benchmark Central Bank Rate steady at 8.50 percent but said it would "pursue a tightening bias stance in the money market through the CBK monetary policy operations in order to anchor inflationary expectations."
The Central Bank of Kenya (CBK), which has maintained its rate since May 2013, said there were no demand driven threats to inflation but noted recent developments in foreign exchange markets had triggered inflationary expectations that "present a threat to the price stability objective of the CBK.
Kenya's consumer price inflation rate rose to 7.08 percent in April from 6.31 percent in March.
The shilling has been depreciating since early March, hitting lows not seen since November 2011, and the CBK has intervened on foreign exchange markets several times last month to sell dollars. Today the shilling was quoted at 95.23 to the U.S. dollar, down 4.9 percent this year.
The CBK said its usable level of foreign exchange reserves amounted to US$6.859 billion, the equivalent of 4.4 months of imports, at the end of April. This compares with $ 7.224 billion as of Feb. 26.
"This level of foreign exchange reserves coupled with the precautionary facility with the International Monetary Fund will cushion the foreign exchange market against any temporary shocks," the central bank said in a statement from May 6.