Faith Masita
The International Monetary Fund (IMF) has recommended that the Central Bank of Kenya (CBK) reduce the number of Monetary Policy Committee (MPC) meetings from six to four annually, arguing that the move would improve the quality of economic forecasts and strengthen monetary policy decision-making.
The IMF said the current arrangement requires the CBK to conduct six MPC meetings each year, with a full forecasting cycle prepared ahead of every session.
According to the fund, this places significant pressure on the central bank’s forecasting team and can limit the depth of economic analysis available to policymakers.
The fund observed that Kenya’s quarterly national accounts (QNA) data are released four times a year, while MPC meetings are held six times annually, creating a mismatch between the availability of key economic indicators and policy deliberations.
As a result, some forecasting rounds are completed under compressed timelines, leaving economists with limited time to update data, refine projections and assess alternative economic scenarios before policy decisions are made.
“The compressed timeline places significant pressure on the forecasting team, especially if major adjustments are needed.”
Align MPC Meetings With Economic Data Releases.
The IMF noted that producing robust forecasts and policy analysis generally requires between five and seven weeks, a timeline commonly followed by inflation-targeting central banks that use Forecasting and Policy Analysis Systems (FPAS).
To address these challenges, the fund proposed that the CBK initially reduce MPC meetings to four annually, with each meeting aligned to the release of quarterly national accounts data and supported by comprehensive economic forecasts.
Under the proposed framework, the central bank would eventually increase the number of meetings to eight per year by introducing four interim sessions between the main policy meetings.
These interim meetings would focus on updated economic data, nowcasts and near-term projections rather than full model-based forecasts, allowing policymakers to respond to changing economic conditions without placing excessive demands on forecasting teams.
The report further recommends that every MPC decision be accompanied by a detailed press release outlining the committee’s reasoning. Major policy meetings should also be followed by a press conference led by the CBK Governor and the publication of a Monetary Policy Report.
According to the IMF, aligning forecasting cycles with key data releases would enhance the consistency, transparency and credibility of monetary policy while giving decision-makers more time to evaluate risks and consider alternative economic outcomes.
