Treasury warns of risks of imported inflation in 2016

Central Bank of Kenya Governor Patrick Njoroge during a press conference at the bank on December 22, 2015. Rising inflation will be a huge concern for businesses, consumers as well Treasury and the Central Bank of Kenya heading in the New Year. PHOTO | DIANA NGILA | NATION MEDIA GROUP  

In Summary

• Rising inflation will be a huge concern for businesses, consumers, Treasury and the Central Bank of Kenya in 2016.
• Latest data by the Kenya National Bureau of Statistics, shows that annual inflation rate accelerated to 8.01 per cent in December of 2015.
• Treasury has also noted that uncertainty in the international oil market is likely to affect the economy.

By BRIAN NGUGI
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Rising inflation will be a huge concern for businesses, consumers as well Treasury and the Central Bank of Kenya heading in the New Year.

The National Treasury has warned of risks of imported inflation in 2016— with fluctuations in exchange rate, owing to a possible strengthening of the US dollar against the shilling.

Latest data by the Kenya National Bureau of Statistics, shows that annual inflation rate accelerated to 8.01 per cent in December of 2015 compared to 7.3 per cent gain in the previous month of October last year above market expectations.

FIVE PER CENT

It is the highest inflation rate since August of 2014. The average projected inflation by 2017 by Treasury is five per cent.

Treasury has also noted that uncertainty in the international oil market is likely to affect the economy.

(READ: 2016 to be tougher as Kenya economic prospects dwindle)

In November, the Central Bank of Kenya advisory committee voted to retain the benchmark lending rate at 11.5 per cent backing the regulator’s position that commercial banks should not raise lending rates.

Inflation averaged 10.65 per cent from 2005 until 2015, reaching an all-time high of 31.50 per cent in May of 2008 and a record low of 3.18 per cent in October of 2010.