Is the Taylor Rule valid for Kenya's monetary policy framework? · The Kenya Bankers Association (@KenyaBankers) Head of Research, Dr. Tiriongo (@SamuelTiriongo), argues that indeed it is · Jared Osoro (@jmosoro) who sits in the Central Bank's Monetary Policy Committee, argues that it isn't entirely valid for Kenya & needs some adjustments A few issues stand out from the submissions made: · The Bankers Association's findings posit that a 1.0% rise in inflation above the target triggers a benchmark rate hike by ~25.0bps · The question that emerges for me is, if Taylor rule assumes inflation is fundamentally demand-driven, how does this play out for Kenya where the CPI is heavily weighted towards Food and Non-Alcoholic Beverages (~32.9%) and Energy/Transport · The Bankers Association's findings posit that Exchange Rate volatility is insignificant in monetary policy rate determination but foreign policy rate (benchmarks by global central banking majors) is a critical factor · The question that emerges for me is the extent to which Kenya's exposure to significant currency depreciation & the resulting imported inflation then helps shape monetary policy