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Kenya's central bank holds key rate at 9.5%

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Kenya's central bank holds key rate at 9.5%

The Central Bank of Kenya's monetary policy committee maintained the central bank rate at 9.50%, noting that the nation's economy had not fully absorbed the rate cut implemented in March.

Overall monthly inflation fell to 3.7% in April from 4.2% in March, but is expected to remain within the Kenyan government's target range mainly due to an expected further decline in food prices with improved weather conditions.

The bank's foreign exchange reserves are at all-time highs, standing at $9.05 billion, and are expected to serve as a buffer against short-term shocks in the foreign exchange market.

Kenya's current account deficit narrowed to 6.1% of GDP in the 12 months to March, from 6.7% in 2017, helping the domestic foreign exchange market to remain stable. The deficit is anticipated to narrow further to 5.4% of Kenya's GDP in 2018 on the back of "stronger growth in agricultural exports, higher diaspora remittances and tourism receipts," the central bank said.

"Global growth is expected to continue strengthening in 2018, but uncertainties remain particularly with regard to the U.S. economic and trade policies, rising international oil prices, and the pace of monetary policy normalization in advanced economies," the bank added.