Wednesday, July 10, 2013

Kenya holds rate steady, past rate cuts still working

   Kenya's central bank held its Central Bank Rate steady at 8.50 percent, saying last year's rate cuts still need time to work their way through the economy and first quarter growth was strong while inflation remains within the government's target and the exchange rate has remained stable.
    But the Central Bank of Kenya (CBK), which cut its rate by 700 basis points in 2012 and 150 points in January, said the high current account deficit and instability in the Middle East could threaten price stability by affecting the price of oil and tea exports, with implications from Kenya's balance of payments and inflation.
    Kenya's Gross Domestic Product expanded by 0.5 percent in the first quarter from the previous quarter for annual growth of 5.2 percent, helped by a 8.3 percent rise in agricultural output.
    The inflation rate rose slightly to 4.91 percent in June from 4.05 percent in May, within the government's medium-term target of 5.0 percent, plus/minus 2.5 percentage points, and the CBK said there were no suggestions of "immediate underlying inflation pressure" and the decline in oil prices and non-inflationary credit growth supported the short-term outlook for inflation.


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