Markets await CBK rates policy
from MARIA MACHARIA in Nairobi, Kenya
NAIROBI – ANALYSTS forecast the Central Bank of Kenya (CBK) to retain its benchmark rate despite recent inflationary pressures.
The analysis comes ahead of the bank’s Monetary Policy Committee meeting later on Tuesday, where decisions in that regard are to be made.
“Following an assessment of recent changes to the global and domestic macroeconomic landscapes, the central bank elected to keep its benchmark rate at 8.50 percent in September.
“We believed the CBK would stay the course despite the recent uptick in inflation as recent price pressures are likely to be transitory,” Rand Merchant Bank (RMB) said in its latest Global Markets Report.
“While a quickening in money supply and credit growth could aggravate inflationary pressures, expectations remain anchored as reflected in August’s MPC market perceptions survey.
“However, the private sector’s confidence regarding the currency is possibly misplaced. Although the pace of shilling depreciation cannot be likened to that of the Ghanaian cedi, it is still meaningful in a market which has barely traded above USD/KESS86.00 over the last three years.”
The central bank has provided assurance that the currency would be buffered from momentary shocks, though its methods of intervention — including the direct sale of foreign exchange reserves and continued open market operations — are not sustainable in the long run.
“Wile the monetary policy stance is suitable in the current environment, we believe that sustained currency weakness, coupled with a gradual rise in core inflation, should provide the CBK with the necessary justification to hike its benchmark rate in early 2015.
“We have pushed out the start of the hiking cycle on account of the lower oil price. Aside from the positive effect on inflation, we believe that a depressed oil price will prompt investors to reallocate capital from oil-exporting economies to net importers of energy to mitigate potential currency losses,” the thinktank stated.
According to RMB, this could provide a fillip to the shilling in the short-run.
– CAJ News
Short URL: http://cajnewsafrica.com/?p=2341