This archive report was first published on 3 September 2019.
As Kenya grapples with drought-induced inflation, analysts have forecasted that the Central Bank of Kenya (CBK) will maintain its key lending rate at nine percent. This prediction comes despite the expected spike in inflation above the CBK's target range of 2.5 to 7.5 percent in the fourth quarter.
According to Capital Economics, a London-based economic research consultancy, the CBK is likely to ignore the inflationary pressures, just as it did in 2017. The firm stated, “We expect that policymakers will keep their key rate on hold at nine percent over the remainder of 2019. Provided that the drought ends, inflation should fall back within the target rate early next year,”
The next Monetary Policy Committee (MPC) meeting, which will decide the fate of the key lending rate, is scheduled for September 23. The Central Bank Rate has been held at nine percent for 12 months to July this year. However, prices of goods and services increased by a slower pace of five percent in August compared to 6.27 percent in July, largely due to improved weather conditions.
CBK expects inflation to continue its downward trend. The slowdown in inflation was attributed to the decrease in food prices, with significant items such as sukuma wiki, potatoes, cabbages, carrots, tomatoes, and maize grain loose experiencing a decline of 8.01, 7.81, 6.78, 6.01, 4.89, and 2.80 percent, respectively.
