The Monetary Policy Committee (MPC) met on May 30, 2022, against a backdrop of a changed global outlook, with elevated global inflationary pressures, heightened geopolitical tensions, rising commodity prices, the COVID-]9 (coronavirus) pandemic and measures taken by authorities around the world in
Response to these developments. The MPC reviewed the outcomes of its previous decisions and the measures implemented to mitigate the adverse economic impact and the financial disruptions.
- Overall inflation increased to 6.5 percent in April 2022 from 5.6 percent in March, mainly due to higher food and fuel prices. Food inflation rose to 12.1 percent in April from 9.9 percent in March, largely on account of vegetable prices due to seasonal factors, and the impact of global supply chain disruptions on cooking oil prices. Fuel inflation increased to 8.5 percent from 5.8 percent driven by the rise in international oil prices. However, this increase was moderated by Government measures to stabilise fuel prices and lower electricity tariff. Additionally, the recent waiver of import duty on maize, and subsidies on fertilizer prices are expected to continue to moderate domestic prices.
- The global economic outlook has become more uncertain, reflecting the impact of the ongoing Russia-Ukraine conflict, uncertainty about the required policy responses in the advanced economies, effects of COVID-19 containment measures in China, and persistent supply chain disruptions. The pace of global economic growth has decelerated mainly reflecting the slowdown in the U.S. and China. Global inflationary pressures remain elevated reflecting the impact of the sharp increase in prices of commodities particularly fuel, fertiliser, edible oils, and wheat. Financial market volatility has also increased significantly amid the recent adjustments in monetary policy in advanced economies.
- The Committee noted the adverse impact of the ongoing Russia-Ukraine conflict and other global disruptions on the Kenyan economy through increases in commodity prices particularly fuel, wheat, edible oils and festiliser.
- The recently released Economic Survey 2022 confined that the Kenyan economy rebounded strongly in 2021 following the easing of COVID-19 restrictions, with real GDP growing by 7.5 percent from a contraction of 0.3 percent in 2020. This performance reflects recovery in key sectors—manufacturing, wholesale and retail trade, education, accommodation and food services, Real estate, transport and storage, and financial and insurance sectors. Leading economic indicators show continued strong performance in the first quarter of 2022, supported by robust activity in construction, information and communication, wholesale and retail trade, transport and storage, and manufacturing sectors. The economy is expected to remain resilient in 2022, with continued strong performance of the services and manufacturing sectors despite the downside risks to global growth.
- The three surveys conducted ahead of the MPC meeting—Private Sector Market Perceptions Survey, CEQs Survey, and the Survey of Hotels—revealed continued optimism about business activity and economic growth prospects for 2022. The optimism was attributed to continued post COVID-19 recovery, improving employment conditions, easing of international travel restrictions, and increased Government infrastructure spending. Nevertheless, respondents remained concerned
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