Kenya to Hold Rate as Inflation Over Mid-Target, Survey SaysDavid Malingha Doya
The Central Bank of Kenya will probably hold its benchmark interest rate as inflation remains at the upper end of the target range.
The Monetary Policy Committee led by bank Governor Njuguna Ndung’u will leave the key rate unchanged at 8.5 percent, according to four of five economists and analysts in a survey by Bloomberg News. One forecast an increase of 50 basis points. The bank is scheduled to announce its decision today.
“Inflation has receded, but it is still high,” Robert Bunyi, managing director of Nairobi-based Mavuno Capital, said by phone. “The policy committee’s natural comfort zone for the inflation rate is 5 percent.”
Ndung’u said in September he expects the inflation rate will range between 5 percent and 7 percent for the rest of the year because the outlook for prices remains stable. The bank has left the policy rate unchanged since July 2013.
Consumer-price growth in East Africa’s largest economy came back within the 2.5 percent to 7.5 percent range in September due to the base effects of a tax increase a year earlier, after hitting a more than two-year high of 8.4 percent in August. Inflation slowed further to 6.4 percent in October on lower food and transportation costs.
The inflation rate in Kenya is the highest in the region after Tanzania’s, which stood at 6.6 percent in September. In neighboring Uganda, the rate was 1.8 percent last month, 0.2 percent in Rwanda in September and Burundi recorded 5.5 percent price growth in August, according to the latest data.
Pressure on Kenyan policy makers to boost the economy eased after the statistics bureau adjusted last year’s growth rate to 5.7 percent from 4.7 percent during an overhaul in the calculation of gross domestic product.
The data revision announced in September increased the size of the economy by a quarter to $55 billion. The government hasn’t provided a new projection for this year’s growth rate.
The shilling depreciated for a second day, falling less than 1 percent to 89.65 per dollar by 8:40 a.m. in the capital, Nairobi, taking its decline this year to 3.8 percent. A close at this level would be the weakest since Dec. 6, 2011.