The Central Bank of Kenya’s (CBK) policy body will hold its meeting on Monday with inflation the key issue on the table.
The Monetary Policy Committee (MPC) is widely expected to leave its benchmark lending rate unchanged despite concern over inflation.
Analysts polled by the Business Daily earlier expect the MPC to leave the rate constant.
The CBK held the base lending rate at 10 per cent at the March meeting despite a slightly weaker shilling and rising inflation.
The shilling has been recording marginal gains for the last few days, with traders noting that there was a decline in dollar demand among importers. On Friday, the CBK quoted the shilling at 103.3. Kenya has ramped up maize, oil and sugar imports recently piling pressure on the shilling.
Headline inflation has shot up to 11.5 per cent, well above the preferred ceiling of 7.5 per cent. “I do not think that the economic fundamentals are right for an increase in interest rates,” said John Kirimi, Sterling Capital Investment director.
Razia Khan, chief economist for Africa at Standard Chartered, said given most of the inflation pressure is confined to food, and given authorities’ plan to reduce food inflation via subsidies, she expects a retention.
“The slowdown in the economy is an additional complicating factor, as is the loan rate cap,’’ she said.
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