Kenyan inflation slowed for the 12th consecutive month in November, increasing pressure on the central bank to ease monetary policy further.
The inflation rate in East Africa’s largest economy dropped to 3.3 percent from 4.1 percent in October, the Nairobi-based Kenya National Bureau of Statistics said today in an e-mailed statement. Prices in the month rose 0.7 percent, it said.
“The central bank is trying to jump-start the economy and slowing inflation gives it room to adjust the key rate at its next sitting by 100 to 200 basis points,” Ignatius Chicha, head of markets at Citigroup Inc. in Nairobi, said by phone.
Central bank policy makers have reversed a tight monetary stance adopted last year by cutting Kenya’s key lending rate 7 percentage points to 11 percent since July in a bid to spur expansion. While Kenya’s economy has been largely shielded from economic turmoil in one of its largest trading partners, Europe, economists have warned a sustained slowdown overseas could damage exports, remittances, aid and investment flows.
Lower interest rates in Kenya could boost the economy by strengthening domestic demand, Robert Gatobu, a dealer with Bank of Africa Ltd., said by phone from the capital, Nairobi. Pressure has also been mounting from consumers and businesses for cheaper credit before national elections scheduled for March 4.
Increases to the benchmark interest rate last year totaling 12.25 percent, to a record 18 percent, helped stabilize the currency after it fell to an all-time low of 106.75 a dollar and bring down inflation from a peak of almost 20 percent. Food price gains eased to 1.7 percent in November after good rains ended a drought in 2011, compared with 26.2 percent growth a year earlier.
The government is targeting about 5 percent inflation in the fiscal year through June. “The main factor is economic growth,” Gatobu said. “The bank has already reached the inflation target they’re looking for.”
The bank’s monetary policy committee is next due to meet in January. The Kenyan shilling traded at 85.90 a dollar by 4:12 p.m. in Nairobi, weakening from 85.76 before the inflation figures were released, according to data compiled by Bloomberg.