The Central Bank of Kenya has been advised to retain its benchmark rate at the current level as one way of insulating the country against the ongoing international credit crisis.

Releasing its monthly proceeding, the Monetary Policy Committee - the bank's advisory body on managing the country's economy - requested CBK to retain the CBR rate a nine per cent.

"At this rate, the Central Bank will deepen its open market operations to effectively manage market liquidity. And ... monitor the international developments and their possible impacts on the domestic market," CBK governor and the secretary to the committee, Prof Njuguna Ndung'u, said in his market briefing.

Monetary policies

Worldwide, central banks are currently putting up various monetary policies to fend off a growing global financial crisis that was triggered by the collapse of investment banks in the US.

Most central banks are pumping money into their respective economies in the hope that the move would help stabilise world financial markets.

But with a weak link to the global market, and experts projecting that the earliest the effect of the meltdown could impact on the Kenyan economy is next year, MPC felt that keeping the rate at nine per cent would help CBK deal with the twin issues of managing local liquidity and shielding the economy from global financial crisis.

Domestic inflation

The latter, MPC says, is of importance as the effect of the meltdown "could be passed on to the domestic inflation."

That would add another challenge to the country's effort to contain the high increase in cost of goods and service already at highs of 27.5 per cent.

On the health of the overall economy, MPC says, that on weighing recent and current economic developments, the country is on the fast lane to recovery after the first quarter slow down.

"The economic indicators suggest that the improvement will accelerate during third and fourth quarters of the year," Prof Ndung'u noted.