The MPC met on the 30th of July 2018 with the aim of reviewing the outcome of its previous policy decisions held on the 30th of May 2018.

The main purpose of the MPC is to is to come up with policy ‘s that ensure the supply of money in the economy is consistent with growth and price objectives set by the government. To maintain price stability, low and stable inflation, in the economy.

Below a summary of what was discussed;

✓ Inflation was within the target range in May and Jun 2018, mainly due to lower food prices. Inflation stood at 4.3% in June as compared to.4.0% in May as a reflection to increases in energy prices. Non -food-non-fuel inflation remained below 5%, an indication of demand driven inflationary pressure has been muted. Higher domestic fuel prices due to the recent increase in International oil prices as the impact of excise tax indexation is expected to have an upwards pressure on the inflation. It is however expected to remain within the target range

✓ The CBK Foreign Exchange reserve remain high and continue to provide an adequate buffer against short term shocks in the foreign exchange market. Currently the reserves stand at USD 8,834 Million (5.9 Months f Import cover) Additionally, the precautionary arrangement with the IMF equivalent USD 989.8 million provides an additional buffer against exogenous shocks.

✓ The private sector credit grew by 4.3% in 12 months June 2018 as compared 2.8% in April 2018. Credit to the manufacturing, building and construction and trade sectors grew by 12.3%,1305% ad 8.6% respectively. Growth in the private sector is expected to pick gradually with the continued recovery of the economy.

✓ The banking sector remains stable and resilient with the average commercial banks liquidity and capacity adequacy standing at 48% and 18% respectively in June 2018. The ratio of gross of non-performing loans fell to 12% in June down from 2.4% in April 2018

✓ Data for the first quarter of 2018 showed a strong pickup of the economy, with the real GDP growth of 5.7 compared to 4.8% in the first quarter of 2017. This is mainly due to the recovery In the agriculture sector due improved weather conditions. Growth in t2018 is expected to be strong.

✓ Global growth is expected to continue strengthening in 2018, but with some uncertainties across economies. With Brexit negotiations and pace of Monetary policy normalization in advanced economies not to mention the escalating trade tension among the developed economies. these developments could lead to further volatility in the financial market.

✓ A preliminary assessment of the impact of the lowering of the CBR in March 2018 showed that this change under the interest rate capping regime had a smaller and slower impact on key macroeconomic variables such as credit and economic growth. Additionally, the risk of perverse outcomes was not ruled out.

the MPC further noted that inflation expectations were well anchored within the target range, and that economic growth prospects were improving. Furthermore, economic output was below its potential level, and there was some room for further accommodative monetary policy. Consequently, while noting the risk of perverse outcomes, the Committee decided to lower the Central Bank Rate (CBR) to 9.00 percent from 9.50 percent.