Kenya central bank sees inflation rising, keeps key rate steady

Kenya’s banking regulator expects prices of goods and services in the country to remain high as a result of supply shocks during the festive season.

The Central Bank of Kenya (CBK) Governor Patrick Njoroge said Tuesday that the inflation rate was likely to remain elevated at 6.5 per cent in the coming months largely due to pressure on food prices such as tomatoes, vegetables, maize flour and sugar.

“We expect inflation to remain at 6.5 per cent during this festive season before easing to the government’s target of 5 per cent,” said Dr Njoroge.

Kenya’s year-on-year inflation surged for the third consecutive month to 6.47 per cent in October on increases in the cost of food and fuel.

The CBK’s Monetary Policy Committee (MPC), in its meeting on Monday, resolved to retain the benchmark lending rate at 10 per cent, citing stability in the forex market and mild inflationary pressure.

The decision came amid uncertainty from borrowers whose loans are priced at four percentage points above the Central Bank Rate (CBR). Commercial banks are also required to pay customers a deposit rate of 70 per cent of the CBR according to the law capping interest rates.

High inflation increases the cost of living by reducing the value of money. It also impacts on investments, interest rates and exchange rates.

The Kenya National Bureau of Statistics is expected to release inflation data for November on Wednesday.