The International Monetary Fund (IMF) has revealed a monetary policy consultation clause with the Central Bank of Kenya as it seeks to have a bigger say in the decisions taken by Kenya’s apex bank in its fight to contain runaway inflation.

In its latest report, the IMF says the Central Bank of Kenya (CBK) will consult with its executive board to set the monetary policy stance when the inflation rate persistently sticks above the 7.5 percent upper ceiling.

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.

In December for instance, CBK told the IMF the main drivers of inflation were in part due to global shocks triggered by the war in Ukraine which affected the pricing of key commodities including fuel, wheat, edible oils, and fertilisers.

As part of policy responses, CBK noted it tightened monetary policy by increasing the CBR.

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.

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.

In December for instance, CBK told the IMF the main drivers of inflation were in part due to global shocks triggered by the war in Ukraine which affected the pricing of key commodities including fuel, wheat, edible oils, and fertilisers.

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