Jan 31, 2023
Kenya Seen Holding Rates For Rest of Year as Inflation Continues to Slow
(Bloomberg) -- Kenyan inflation unexpectedly cooled for a third straight month in January as prices of food eased.
Consumer prices rose an annual 9%, compared with 9.1% last month, Kenya National Bureau of Statistics said Tuesday in an emailed statement. Only one of five economists polled by Bloomberg expected inflation to slow. Prices rose 0.2% in the month.
The Central Bank of Kenya Governor Patrick Njoroge said Monday the monetary policy committee projects domestic inflationary pressures to ease in the near term after pausing its tightening campaign. An agriculture sector survey conducted by the central bank reveals prices of most food items are expected to decline or remain unchanged next month.
The MPC also expects a temporary waiver of import duties on corn, the nation’s staple, rice and wheat from February to moderate prices, the governor said. That may help bring the inflation rate that’s hovered above the central bank’s 2.5% to 7.5% target since June back within range early this year as forecast by the MPC in November.
Absa Group Ltd. analysts Ridle Markus, Mpho Molopyane and Tlhologelo Thoka said in a research note that inflation may revert to the central bank’s target band by the second quarter of this year and average 5.9% in 2023. That compares with 7.6% in 2022, according to Treasury data.
“Given our view that inflation has likely peaked, we expect the MPC to keep the policy rate unchanged through 2023,” they said.
Still plans to eliminate subsidies on diesel and kerosene and increase electricity tariffs by about 40% in April may place upward pressure on prices in coming months.
--With assistance from Simbarashe Gumbo.
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