IMF to have a say on CBK decisions in containing runaway inflation

CBK to consult IMF (International Monetary Fund) on setting monetary policy to contain high rate of inflation.

In an effort to have a greater say in the choices made by Kenya’s top bank in its fight against out-of-control inflation, the International Monetary Fund (IMF) has disclosed a clause requiring consultation with the Central Bank of Kenya over monetary policy.

The Central Bank of Kenya (CBK) would engage with its executive board to determine the attitude of monetary policy when the inflation rate continuously remains above the upper ceiling of 7.5 percent, according to the IMF’s most recent report.

The clause, part of the ongoing arrangement between Kenya and the IMF, was first triggered in December after inflation stayed above 7.5 percent in the previous three months.

It was triggered again in June forcing the CBK to lift the benchmark interest rate, which is known as the Central Bank Rate (CBR), at an emergency monetary policy meeting.

“Inflation has remained outside our target band since June 2022, mainly driven by food and fuel prices. This led to non-observation of the programme’s Monetary Policy Consultation Clause (MPC), triggering a consultation with the IMF Executive Board,” CBK said in a letter attached to the IMF report.

The CBK is required to explain reasons why inflation has breached the upper limit and discuss with the lender potential policy responses and the outlook on inflation.

According to the CBK, monetary policy tightening would be complemented by fiscal measures taken to moderate the prices of specific commodities while it continues to monitor the drivers of inflationary pressures.

CBK Governor Kamau Thugge told the IMF that inflation would steadily come down and return to the targeted band in months, even as food and fuel prices present persistent pressure.

Uhuru’s longtime security aide joins Ruto

Kenya tops the list of fraud countries

Manufactures slap a 9 percent price increase on goods over additional taxes

Government breaks silence after Sudan hackers attack crucial state websites 

“CBK expects overall inflation to decline in coming months, and its return to the target band is imminent. The rate of decline, will, however, depend on how food and fuel prices evolve in the period,” he said.

On June 26, the MPC lifted the benchmark interest rate to 10.5 percent from 9.5 percent, leaving the CBR at the highest rate since July 2016.

Inflation has already handed the CBK boss his first tough test as food and fuel prices pressure explode by impacting the cost of non-food non-fuel commodities- core inflation.

“Inflation is almost like a tax because it reduces everybody’s real income. Therefore, it is very important that we address the inflationary pressures with the idea of reducing the cost of living, which is one of the issues that has concerned the country,” he noted.

Inflation eased slightly in June to 7.9 percent from eight percent in May but consumer prices are expected to increase in July, largely from the implementation of higher VAT on petroleum products at the standard rate of 16 percent from eight percent.

Also read,

Banks raise interest rates on loans to more than 20 percent

National Cybercrimes Committee announces massive attacks on government’s critical services

Banks to be granted access to secret State database to monitor transactions

Sudan hackers targeting Kenyan Government sites amid the escalation of animosity

Follow us

FaceBook

Telegram