Kenya May Hold Benchmark Rate Amid Disputed Vote OutcomeSarah McGregor
Kenya’s central bank will probably keep its benchmark interest rate unchanged for the first time since July as a dispute over presidential election results clouds the outlook for the economy.
The nine-member Monetary Policy Committee led by central bank Governor Njuguna Ndung’u will hold the benchmark interest rate at 9.5 percent, according to all nine analysts surveyed by Bloomberg News. The bank is scheduled to announce its decision in an e-mailed statement later today.
Policy makers are meeting three days after the electoral commission declared Uhuru Kenyatta, who was indicted by the International Criminal Court for crimes against humanity, as Kenya’s new president. The 51-year-old outgoing deputy prime minister won 50.07 percent of votes cast, narrowly avoiding a runoff with Raila Odinga. Odinga plans to ask the Supreme Court to overturn the result, citing evidence of ballot tampering.
“They will give pause this time because of the results of the election have just been declared and there is still a level of uncertainty with the expected court challenge,” Yvonne Mhango, an economist for sub-Saharan Africa at Renaissance Capital, said in a phone interview from Johannesburg. “The bank will want to be cautious and see the impact on markets, especially on the shilling.”
The shilling has strengthened 0.3 percent against the dollar since the March 4 election. It declined today for the first time in four days, falling 0.2 percent to 85.65 per dollar by 11:32 a.m. in Nairobi.
The election was largely free of the violence that tainted the last national vote in 2007, when accusations of vote-rigging sparked two months of ethnic and political clashes that left more than 1,100 dead and drove another 350,000 from their homes.
The Central Bank of Kenya cut its key lending rate by 8.5 percentage points in the past four meetings as slower inflation enabled policy makers to help spur growth in East Africa’s biggest economy.
While inflation accelerated for the second month in February to 4.5 percent, it remains below the government’s 5 percent target.
The outlook for inflation is improving, giving the bank room to resume rate cuts in May, Razia Khan, head of African economic research at Standard Chartered Plc in London, said in an e-mailed note to clients.
“An unchanged decision in March does not mean the end of Kenya’s easing cycle,” she said. “But clearly any further easing will depend very much on circumstances post-election.”