By George Mwangi
Kenya's central bank announced on Wednesday that it will be keeping its key interest rate at 10.50% in order to manage inflation pressures. This comes after a rate increase from 9.50% in June.
According to the country's Monetary Policy Committee, inflation is already within the target range and is expected to continue declining, particularly as food inflation is projected to decrease.
"The committee also acknowledged that the impact of the June 2023 tightening of monetary policy on stabilizing inflation expectations is still being felt in the economy," the committee stated.
In July, Kenya's inflation rate dropped to 7.3% from 7.9% in June, driven by lower fuel, food, and non-food non-fuel prices.
Food inflation decreased from 10.3% in June to 8.6% in July, which can be attributed to decreased prices of essential vegetable and non-vegetable food items due to improved supply resulting from extended periods of rainfall and lower global food prices.
Fuel inflation, on the other hand, increased from 12.9% in June to 14.5% in July. This rise primarily reflects the impact of higher electricity prices and the implementation of a 16% value-added tax on petroleum products.
"The overall inflation rate is expected to continue moderating in the coming months, largely due to reduced food prices resulting from improved supply of essential food items such as corn, as well as the government's efforts to enhance sugar supply through imports," the central bank affirmed.
The Monetary Policy Committee is set to reconvene in October; however, they remain prepared to meet earlier if the need arises.