(Bloomberg) -- Kenya’s central bank is likely to leave its benchmark rate unchanged for the third time in a row after a surprise easing in inflation last month.

Five of six economists polled by Bloomberg forecast the monetary policy committee will maintain borrowing costs at 10.5% at its meeting on Tuesday. Consumer prices rose an annual 6.8% in November — the first time in three months that the rate has declined.

“The lower-than-anticipated print affirms our view that the MPC will keep the policy rate steady at 10.5% given that inflation remains within the target range of 2.5% to 7.5%,” Samantha Singh-Jami, Africa strategist at Rand Merchant Bank, said in a research note. The annual rate declined below 7.5% for the first time in a year in July.

Price-growth eased last month as increases in food costs slowed, helped by the government’s decision to extend duty-free imports of sugar and rice.

Continuing pressure on the shilling, which has lost about a fifth of its value against the dollar this year, suggests that a further tightening in policy may be warranted, said Mohamed Basha, head of macro research at EFG Hermes. He forecast the bank will hold rates at today’s meeting.

Read More: Top Banker Says Kenya Shilling’s Weakening Has Peaked

The rate at which Kenya’s shilling lost value to the dollar slowed for the third consecutive month in November, as the gap between the currency’s spot rate and fair value narrows. That prompted James Mwangi, the head of the nation’s biggest bank, to predict the depreciation of the currency has peaked.  


Pressure on the currency is being offset by recent external funding commitments, said Sthembiso Nkalanga at JPMorgan Chase & Co. Last month, the International Monetary Fund agreed to expand its financing to Kenya by $938 million to bolster its reserves before a repayment on a $2 billion that’s due in June. 

The bank’s foreign-exchange reserves stood at $6.74 billion at the end of November, down from $7.47 billion at the end of June, and are below the critical level of four months’ import cover.

“With a sizable external funding gap the scope of currency support should be limited and the Central Bank of Kenya probably will be required to maintain restrictive rates in the near-term,” Nkalanga said. “Our baseline projection is for inflation to stay within target, but the policy rate likely will be kept at 10.5%” well into the third quarter of 2024, he said.

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