NAIROBI, May 28 (Xinhua) -- Kenya's apex bank on Monday retained its benchmark rate at 9.5 percent due to increased optimism for growth prospects amid rising international oil prices.
Patrick Njoroge, the Central Bank (CBK) Governor and chairman of the Monetary Policy Committee (MPC), said inflation expectations were well anchored within the government target range, economic output was below its potential level, and there was some room for accommodative monetary policy.
"The Committee assessed that the policy action at its March meeting (a reduction of the Central Bank Rate by 50 basis points) was yet to be fully transmitted to the economy, including a determination of any perverse outcomes," Njoroge said in a statement issued after the meeting.
He said the CBK's top monetary policy organ will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary.
Njoroge said the Monday meeting was held against a backdrop of sustained macroeconomic stability, favorable weather conditions, increased optimism on domestic economic growth prospects, and rising international oil prices.
According to the governor, month-on-month overall inflation fell to 3.7 percent in April from 4.2 percent in March largely due to lower food prices, particularly for Irish potatoes, cabbages, and sugar.
The decrease in food prices outweighed the increases in energy prices. Non-food-non-fuel (NFNF) inflation rose slightly, but remained below 5 percent indicating that demand driven inflationary pressures are muted.
"The rising international oil prices and the impact on domestic fuel prices are expected to continue exerting moderate upward pressure on inflation," said Njoroge.
"Nevertheless, overall inflation is expected to remain within the Government target range mainly due to the expected further decline in food prices following improved weather conditions," he added.
The MPC said the precautionary arrangement with the International Monetary Fund equivalent to 989.8 million U.S. dollars, will provide an additional buffer against exogenous shocks.
The recently released Economic Survey 2018 confirmed that the economy was resilient in 2017, as real Gross Domestic Product (GDP) grew at 4.9 percent despite the adverse effects of the drought on agricultural production, weak private sector credit growth, and a prolonged elections period.
This outcome, the survey says, was driven by the strong performance of the services sector, particularly information and communications, wholesale and retail trade, transport and communications, and tourism.
Njoroge said stronger growth is expected in 2018 supported by a recovery in agriculture, a resilient services sector, and the stable macroeconomic environment.
