CBK’s Monetary Policy Committee is likely to retain the lending rate at 9% in its September 23 meeting for the remainder of 2019.
In a report, Kenya: Despite drought, next rate move will be a cut Capital Economics says it expects that CBK will retain the lending in Q4. However, the report notes that drought in Kenya’s North and Eastern regions may push inflation above the CBK’s target range in Q4.
Monthly data from the Kenya National Bureau of Statistics indicate a decline in inflation and consumer price index (CPI) in August largely due to favourable weather conditions. Inflation in August declined by 0.9 per cent to 5% from 6.3% recorded in July while CPI fell to 201.78 in August from 203.61 in July.
There is an expectation for inflation to keep going down and follow a five months downward trend.
However, total maize production may fall by about 20% during the 2019/2020 harvest year pressuring food prices leading to a rise in inflation.
Capital Economics Analysts expect the shilling to remain relatively stable against the US dollar due to narrowing external imbalance and Kenya’s reduced dependence on hydropower and rain-fed agriculture.
Related
