Inflation rate expected to fall for tenth month in a row

The country’s inflation is expected to fall for the tenth month in a row this month to 5.40 per cent as lower food prices offset upward pressure from a jump in retail fuel prices, a poll showed.

Respondents said the rate, which has been falling since the end of last year, giving policymakers room to cut lending rates and shore up economic growth, could be close to bottoming out as the favourable base effects draw to a close.

The poll of 11 analysts forecast the year-on-year rate of inflation would fall to a median estimate of 5.40 per cent, down from 6.09 per cent last month. The data is due out tomorrow.

“Food disinflation will likely remain pronounced, perhaps even countering any upside pressures that may emanate from increases in fuel prices,” said Phumelele Mbiyo, regional head of research at CFC Stanbic bank.

Kenya’s Energy Regulatory Commission raised the maximum prices of petrol, diesel and kerosene during its monthly review mid-this month, citing higher prices of crude oil in global markets.

The lowest forecast was 4.50 per cent with one respondent saying inflation had bottomed out and was likely to edge up to 6.15 per cent.

Bank of Africa trader Peter Mutuku, who predicted a marginal rise in the rate, attributed the view to a combination of a potential jump in borrowing as rates fall and the higher energy costs.

Others felt the bottom was still at least two months away.

“The inflation rate will be close to its nadir in November when the base effect of last year starts to fall off,” said Aly Khan Satchu, an independent analyst and trader.

Inflation peaked last November at just under 20 per cent, causing widespread anger and demands that the central bank governor Njuguna Ndung’u, be sacked for failing to keep macroeconomic fundamentals on an even keel.

But the former academic survived the storm and has since restored his policymaking credentials by maintaining a stable exchange rate this year, amid falling prices.

— Reuters