Kenya to adopt inflation targeting to sharpen monetary policy

NAIROBI (Reuters) - Kenya will start targeting inflation to make its monetary policy more predictable and efficient, its finance minister said on Thursday. The east African nation of 40 million people allows itself a margin of 2.5 percentage points on either side of a targeted medium-term inflation rate of 5 percent. Henry Rotich, the cabinet secretary for the Treasury or finance minister, said discussions had been held on moving towards targeting using a fixed inflation rate. Doing so would allow policymakers to tailor the policy more closely to meeting the desired rate, the minister said. Year-on-year inflation was 6.27 percent in March, within the 2.5-7.5 percent range the government is comfortable with. It had surged close to 20 percent by the end of 2011. Ultra-tight policy has since pulled it down. Rotich said Kenya was in the final preparatory stages of its debut Eurobond, of up to $2 billion, with an announcement on the roadshow expected in about a week's time.