IMF Urges CBK to Cut Policy Meetings to Improve Economic Forecasts

The International Monetary Fund (IMF) has advised the Central Bank of Kenya (CBK) to reduce the number of its monetary policy meetings from six to four per year to improve the quality of its economic forecasts and decision-making.

According to the IMF, the proposed change would help align the meetings of the Monetary Policy Committee (MPC) with the release of key economic data, particularly quarterly national accounts statistics, which are published four times a year.

The recommendation follows technical assistance provided by the IMF to help CBK strengthen its Forecasting and Policy Analysis System (FPAS), a framework used to guide decisions on interest rates and inflation management.

In a technical report, the IMF said the current schedule of six MPC meetings annually does not match the timing of major economic data releases, making it difficult for analysts to conduct comprehensive assessments before policy decisions are made.

“The mission recommended that CBK consider initially reducing the number of MPC meetings to four per year and later increasing them to eight,” the IMF said.

The lender explained that the mismatch between data publication and policy meetings has forced some forecasting exercises to be completed within tight timelines, limiting the ability of analysts to fully assess new information.

According to the report, when fresh inflation data is released shortly before an MPC meeting, CBK staff are often required to update economic models and forecasts within a short period, leaving little time for detailed analysis.

The IMF noted that synchronising policy meetings with data releases would allow the central bank to produce more accurate forecasts and make better-informed decisions on interest rates and inflation management.

In the long term, the IMF suggested that CBK could increase the number of MPC meetings to eight annually once the forecasting system becomes more advanced and capable of handling more frequent policy reviews.

The Monetary Policy Committee is responsible for setting the Central Bank Rate (CBR), which influences borrowing costs across the economy and plays a key role in maintaining price stability.