Inflation to stay above state target until early next year

Patrick Njoroge

Central Bank of Kenya (CBK) Governor Patrick Njoroge. PHOTO | DIANA NGILA | NMG

Kenya’s inflation rate will remain above the government’s target range till early next year before easing towards the target on the back of policy measures, central bank governor Patrick Njoroge said yesterday.

Inflation surged to 9.6 per cent last month after the drought drove up food prices and higher energy costs.

Kenya’s inflation has since June breached the target range of 2.5-7.5 per cent, prompting the CBK’s Monetary Policy Committee to raise benchmark interest rates to curb consumer spending.

“We are addressing the inflation momentum that is there and the policies that were put there, we believe are appropriate,” CBK Governor Patrick Njoroge said on Thursday.

“Consequently, we would expect the inflation outcome to begin to come down in the near future and hopefully early next year we will see the outcome in the target band.”

Inflation — a measure of the cost of living over the last 12 months— October climbed to a five-and-a-half-year high of 9.6 per cent in October from 9.2 per cent a month earlier on elevated food and energy prices.

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Since May, the MPC has raised the benchmark interest rate by 175 basis points to 8.75 per cent, signalling lenders to raise the cost of borrowing.

Increasing the key policy lending rate makes borrowing more expensive, and this is expected to reduce spending by businesses and families with the ultimate goal of lowering the prices of goods and services.

Dr Njoroge, however, declined to forecast when inflation will peak.

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“Whether we have completely turned it [inflation] or there will be additional month or two where it hasn’t turned, that … [depends] on many factors. Turning points are the most difficult things in economics to predict,” he said.

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