Kenya’s Monetary Policy Remains Limited

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Last year, calls for monetary policy accommodation were on the rise given the need to prop up economic growth at a time of subdued business activity. However, the Central Bank’s reluctance could have been linked to its aversion towards the protracted electoral cycle and the capped interest rate environment that limited the effective transmission of monetary policy.

A better political landscape and improving macroeconomic variables has since improved investor sentiments towards the economy and could have also paved way for the much needed 50bps policy rate cut in March 2018. This was also complemented by prospects of a healthy global economy, rising commodity prices and a globally weak US dollar (y/y). It also looked more than likely that a policy rate cut would do more good than harm despite the capped interest rate environment.

That said, in its latest policy setting meeting this May, the monetary policy committee (MPC) left…

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