The Central Bank of Kenya will on Monday hold its Monetary Policy Committee (MPC) meeting where it will set its benchmark lending rate.

The bank held the rate at 10 percent at its last meeting in November.

During the meeting, CBK stated that inflationary pressures were mild and inflation would remain within the Government target range in the short term.

CBK Governor Patrick Njoroge had stated that the new banking law capping interest rates at four per cent above the Central Bank Rate had ‘complicated’ the monetary policy.

He had however stated that they would be monitoring how the new law is affecting the monetary policy.

Monetary policy consists of decisions and actions taken by the Central Bank to ensure that the supply of money in the economy is consistent with growth and price objectives set by the government.

It’s objective is to maintain price stability in the economy. Price stability refers to maintenance of a low and stable inflation.

The Central Bank’s monetary policy decisions are made to maintain a low and stable inflation rate over time, which is an indication of price stability.

Inflation is a general increase in price levels over time.

It is based on the prices of various consumer goods and services, which are evaluated and statistically represented in the Consumer Price Index (CPI).

The month-on-month (or year-on-year) inflation rate is determined by comparing the CPI for a particular month to the CPI of that same month in the previous year.