Kenya Inflation Slows for 10th Month Signaling Interest Rate Cut

Kenyan inflation slowed for the 10th consecutive month in September, increasing the scope for the central bank to lower interest rates.

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 smcgregor5@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.