Kenya July Inflation to Rise but Will Remain Within 7.5pct Target

Kenya’s Inflation up 5.82% as Food Costs Jump in December

Mombasa MacKinnon Spice and vegetable Market I Courtesy

Kenya’s inflation is projected to rise by 6.0% in July mainly on lower base effects but to remain with the 2.5% – 7.5%, target range.

“Traditionally, interest rates track inflation movements due to the need to compensate investors for the erosion of returns as well as the implication for policy action. Even then, inflation reading for July is likely to have little implication for the yield curve as liquidity remain dominant and preference for sovereign risk intact,” says Commercial Bank of Africa analysts in their Weekly Fixed Income Report – 29th July 2019.

June inflation rose to 5.7%  from 5.5% in May largely driven by a rise in food inflation to 6.6% in June from 6.0% in May.

Genghis Capital also affirms similar sentiments that ‘consumer confidence will hold steady with inflation falling within target levels (2.5% – 7.5%)’. However, “The Organization of the Petroleum Exporting Countries and its allies ministerial meeting in July remains risk-neutral for fuel inflation for 2H19 although heightened geopolitical tension in Iran remains the biggest headwind.”

July’s Monetary Policy Committee (MPC) retained the prevailing monetary policy stance leaving the Central Bank Rate (CBR) unchanged at 9.0%, citing that inflation expectations remained well anchored within the target range and that the economy was operating close to its potential.

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