(Updates with comments on inflation)
NAIROBI, March 27 (Reuters) - Kenya’s central bank held its benchmark lending rate at 10 percent on Monday as expected, saying high food prices were to blame for a rise in the rate of inflation.
All 10 analysts polled by Reuters last week expected policymakers to hold the rate for the third time in a row, after a drought drove up food prices.
The bank’s Monetary Policy Committee (MPC) said inflation, which surged to 9.04 percent in February, was likely to remain outside the government’s preferred band of 2.5-7.5 percent in the near term, even as demand in the economy remained low.
“The committee remains concerned about the prevailing uncertainties, including the impact of the interest rate caps on the effectiveness of monetary policy,” the MPC said in a statement.
The government capped commercial rates at 4 percentage points above the central bank rate last September, worsening already sluggish private sector credit growth.
Reporting by Duncan Miriri; Editing by Catherine Evans