The Central Bank of Kenya(CBK) is expected to hold the key policy rate when the Monetary Policy Committee(MPC) holds its meeting on Tuesday, 28th September 2021.
“Our expectation is that the Central Bank Rate (CBR) will be held steady at 7.00%, the tenth consecutive neutral monetary policy outcome. Our view is guided by inflation expectations that remain anchored, although the recent supply shocks may lead to a higher inflation print,” said a weekly note from Genghis Capital Investment Bank.
CBK must deal with rising inflation and weakening Kenya Shilling
Credit to the private sector grew 7.7% in June 2021, against a target of 8.5% with commercial banks still preferring to pack the bus in Government Securities and other risk-free securities instead of lending to potentially defaulting private sector and individuals.
The MPC is meeting at a time when there has been a huge hike in the price of fuel, that will run between September 15th to October 14th, 2021.
According to EPRA data, Kenyans are paying more for Super Petrol, Diesel and Kerosene, whose prices in Nairobi has gone up by KSh 7.58 per litre, KSh 7.94 per litre and KSh 12.97 per litre respectively, effective 15th September 2021 to 14th October 2021.
At the same time, the Kenya Shilling has been on a losing streak, making it expensive for dealers to import crude.
The CBK weekly statistical bulletin shows that the Kenya Shilling exchanged at 110.39 against the US dollar on September 23rd, compared to 110.03 per US dollar on September 16th 2021.
Murban oil price increased to US$ 75.01 per barrel on September 23 from US$ 74.01 per barrel on September 16, 2021, raising fears of more steep prices in October 2021 for Kenyan consumers.
Kenya’s August 2021 inflation climbed to 6.57% compared to 6.55% Inflation rate in July due to the high cost of food and transport. This scenario has not changed as late rains delay in most parts of the farming counties, affecting food supply. A rise in the price of imported crude oil is not helping matters.
” I do not see any change in the CBR rate because it will have no effect on the current situation,” said Reginald Kadzutu, CEO Amana Capital.
It will be interesting to watch how CBK mandarins juggle between retaining the CBR will cooling-off rising prices while protecting the Kenya Shilling for further battering.
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