Kenya’s Inflation Stays Below 5% in Boost for Rate Cut Prospects
TLDR
- Kenya’s inflation rate remained below the central bank’s 5% midpoint target for the eighth consecutive month
- Consumer prices rose to 3.3% in January from 3% in December, according to the Kenya National Bureau of Statistics
- With inflation contained and the Kenyan shilling relatively stable, the Central Bank may cut interest rates for a fourth straight meeting on February 5
Kenya’s inflation rate remained below the central bank’s 5% midpoint target for the eighth consecutive month, rising to 3.3% in January from 3% in December, according to the Kenya National Bureau of Statistics. The increase, driven by food and transport prices, was slightly above the 2.8% forecast in a Bloomberg survey.
With inflation contained and the Kenyan shilling relatively stable, the Central Bank of Kenya (CBK) may cut interest rates for a fourth straight meeting on February 5. In December, the CBK lowered the benchmark rate by 75 basis points to 11.25%, exceeding market expectations.
The Kenya Bankers Association has called for another rate cut to boost borrowing and economic growth. Kenya’s economy grew at its slowest pace in almost four years in Q3 2024, affected by anti-government protests and declining private sector credit.
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Key Takeaways
Kenya’s low inflation and slow economic growth increase the likelihood of a monetary policy easing at the upcoming CBK meeting. Policymakers must balance supporting economic recovery while ensuring price stability. The Kenyan shilling’s stability against the US dollar has helped keep inflation low, reducing imported cost pressures. However, the economy remains fragile, with credit growth slowing and recent political unrest dampening investment sentiment. A rate cut could stimulate borrowing and business activity, but the CBK may remain cautious amid external risks such as global financial conditions and commodity price fluctuations. Investors will watch the CBK’s tone and economic projections for signals on future policy direction.
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