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Inflation seen stabilising for rest of year amid Covid-19

cabbages
Traders sell cabbages in Nakuru. Subdued demand because of the disease is expected to tame price increase. PHOTO | JOHN NJOROGE 

Private sector players, banks and analysts expect Kenya’s inflation to remain within the preferred CBK range for the rest of the year, with weaker demand and lower oil prices helping mitigate any Covid-19-related price increases.

Inflation stood at 5.62 percent in April, up from 5.51 per cent in March. The CBK’s preferred range is five per cent plus or minus 2.5 percentage points. The May inflation number will be released on Friday.

Analysts at city-based investment bank Genghis Capital said in a macroeconomic note they expect inflation to come down this month, during which fuel prices fell by the largest margin in 13 years. “We expect a moderation at five percent,” said Genghis in its note.

Speaking in a video call with Stanbic Bank investors last week, David Rogovic, vice president and senior analyst at Moody's Investors Service, said a lack of volatility, especially in core inflation, is expected to continue.

Inflation had been contained even before the coronavirus hit the economy, allowing the CBK to concentrate monetary policy action of kick-starting economic growth by cutting the base rate.

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“It is hard to see the demand side accelerating, while imported inflation is also mute. We don’t expect much change and the lack of volatility will continue,” said Mr Rogovic.

Respondents polled in CBK’s market perceptions survey of March expect the cost of living to range between 6.0 and 6.3 per cent this year, with banks and microfinance banking institutions projecting the cost to go up by 6.1 percent in the next one year.

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