The Central Bank of Kenya surprised the market by leaving its main lending rate unchanged to allow previous increases to work through the economy and as inflation eased to a four-month low.
The Monetary Policy Committee kept the key rate at 11.5 percent in the second meeting chaired by Governor Patrick Njoroge, the Nairobi-based central bank said in an e-mailed statement on Wednesday. Four of 14 economists surveyed by Bloomberg predicted the decision, while the rest forecast increases of 50 basis points to 200 basis points.
Policy makers raised the rate by a total of 300 basis points in the past two meetings to help bolster the shilling and curb price pressures. Inflation eased to 6.6 percent in July from 7 percent in the previous month, remaining below the upper end of the government’s 7.5 percent target.
“The committee concluded that the measures taken in the previous meetings were yet to be fully transmitted to the economy,” according to the statement. “The foreign exchange market was volatile in early July 2015, but has stabilised reflecting in part the impact of monetary policy measures.”
The shilling rose 0.4 percent to 100.8 against the dollar as of 5:23 p.m. in Nairobi, paring its decline this year to 10 percent.
Treasury Secretary Henry Rotich said in a July 15 interview that the central bank has room to pause its rate-tightening cycle because inflation has yet to breach the upper limit of the government’s target range.