NAIROBI, March 27 (Xinhua) -- The Central Bank of Kenya (CBK) on Monday maintained the country's benchmark lending rate at ten percent due to the prevailing uncertainties including the impact of the interest rate caps on the effectiveness of monetary policy.
The CBK Governor Dr Patrick Njoroge, who chaired the Monetary Policy Committee (MPC), said that the overall inflation is expected to remain outside the government's target range in the near term due to the elevated food prices, even as demand pressures remain subdued.
"The Committee will continue to closely monitor developments in the domestic and global economies, and stands ready to take additional measures as necessary," Njoroge said in statement issued in Nairobi.
MPC's meeting was meant to review the outcome of its previous policy decisions as well as recent economic developments.
Following the committee's decision, the maximum lending rate for commercial banks will remain at 14 percent while minimum interest rate for deposits remains at seven percent.
Njoroge noted that month-on-month overall inflation rose to nine percent in February, up from seven percent in January, almost entirely due to increases in food prices.
The country's top monetary policy organ said that the foreign exchange market has remained stable.
"This has been supported by a narrower current account deficit mainly due to lower imports of petroleum products, machinery and transport equipment. Additionally, inflows from horticulture, tourism, and diaspora remittances are resilient," the CBK noted.
The CBK's foreign exchange reserves currently stand at 7.76 billion U.S. dollars (5.1 months of import cover) compared to 6.96 billion dollars (4.6 months of import cover) at the end of January.
"The increase is largely due to inflows of planned external loans of the government. These reserves, together with the precautionary arrangements with the International Monetary Fund (IMF), equivalent to 1.5 billion dollars, continue to provide an adequate buffer against short-term shocks," the MPC said.