Kenya to Hold Rate Before Bank Chief Appointed, Survey ShowsDavid Malingha Doya
Kenya’s central bank will probably hold its key lending rate to maintain stability in the economy before the appointment of a new governor to replace Njuguna Ndung’u, who steps down next week.
The Monetary Policy Committee will leave the benchmark interest rate unchanged at 8.5 percent, the level it has been held at for almost two years, according to all 11 economists and analysts surveyed by Bloomberg. The bank is scheduled to announce its decision Thursday afternoon in the capital, Nairobi.
Holding the rate would create “stability for the next governor to start from,” Robert Bunyi, managing director of Nairobi-based investment company Mavuno Capital, said by phone.
It will be the final rate-setting meeting for Ndung’u, who leaves on March 3 after leading the bank for eight years. Ndung’u oversaw monetary policy through a period of rising investment in infrastructure and tax reforms, which have accelerated growth. Economic expansion is forecast by the government at 7 percent in 2015-16 compared with 6.1 percent in the year through June. The annual inflation rate declined to 5.5 percent in January from 6 percent in December, moving closer toward the government’s 5 percent mid-range target.
The shilling has weakened 0.9 percent against the dollar this year, adding to the 4.8 percent decline in 2014, as attacks blamed on Islamist militants scared off visitors and curbed tourism, a key source of the country’s foreign exchange. The currency was little changed at 91.40 against the dollar by 2:43 p.m. in Nairobi.
Kenya’s FTSE-NSE 25-Share Index rallied to a record high, rising 9 percent since the start of the year.
The central bank is in a position to maintain interest rates because economic growth is picking up and inflation doesn’t pose a risk, said Bunyi.
“When we look at the substantial issues, there is no urgent need to boost the economy because of lower inflation, and lower oil prices,” he said. Kenya is a crude importer.
Central bank Deputy Governor Haron Sirima is seen as President Uhuru Kenyatta’s favorite to succeed Ndung’u, according to two people familiar with the discussions. Other possible candidates for the role include Geoffrey Mwau, economic affairs director at the Treasury, and Commercial Bank of Africa Managing Director Isaac Awuondo.
Manoah Esipisu, a spokesman for Kenyatta, declined to comment on the candidates and said an announcement will be made at a later stage.