The inflation rate in East Africa’s largest economy dropped to 5.3 percent from 6.1 percent the previous month, the Nairobi- based Kenya National Bureau of Statistics said today in an e- mailed statement. In the month, prices rose 0.3 percent.
Slowing inflation may lead the central bank to cut its key lending rate for a third time to boost demand, reversing monetary tightening undertaken last year to curb prices and support the shilling. The bank has cut the rate twice since July, by a total of 5 percentage points, to 13 percent.
“There is still scope for the central bank to cut rates this year” by at least 3 percentage points, Solomon Alubala, head of trading at Cooperative Bank of Kenya Ltd., said by phone before the inflation figures were released.
The Monetary Policy Committee is due to hold its next meeting in November.
Food prices in Kenya are declining as good weather boosts harvests, following the worst regional drought in six decades last year, Alubala said. “The big major risk to inflation is the upcoming elections, when typically you see the government spending a lot more money,” he said. Kenya is scheduled to hold general elections in March.
The International Monetary Fund this week said Kenya’s monetary easing should be gradual, warning of the risk that any domestic crop-supply disruptions could stoke inflation because global food prices are rising. The IMF forecasts that Kenya’s economy will grow 5 percent this year and next.
To contact the reporter on this story: Sarah McGregor in Nairobi at firstname.lastname@example.org
To contact the editor responsible for this story: Nasreen Seria at email@example.com