This archive report was first published on 21 July 2019.
Published on July 21, 2019, analysts are divided on the likely Monetary Policy Committee (MPC) stance on interest rates ahead of its meeting on Wednesday.
The MPC left the key rate at nine percent at its last meeting on May 27, citing contained inflation and a stable foreign exchange market.
However, recent spikes in food prices, including maize flour, beans, and green grams, have pushed inflation to 5.7 percent, wiping out the temporary benefits of recent rainfall.
Some analysts, including Deepak Dave of Riverside Advisory Capital, believe a central bank rate (CBR) cut could be key to injecting cash into the struggling economy.
“An interest rate cut is needed to stimulate activity, but hands are tied because our deficit makes a cut dangerous as it would drive inflation. The Governor has a very tough decision to make,” said Deepak Dave.
Others, however, disagree, with Elizabeth Nkukuu, chief investment officer at Cytonn Investments, saying key macroeconomic fundamentals remain unchanged.
“We believe that the MPC will maintain the current policy stance, given the macro-economic environment is still relatively stable,” she said.
Stanbic Bank economist Jibran Qureshi also believes a rate cut is unlikely, citing the complications caused by rate caps.
