Monetary Policy Committee members and journalists follow proceedings during a past Press conference. FILE PHOTO | NMG
Concerns over inflation and unlocking credit to the private sector are set to feature as the Central Bank of Kenya (CBK) holds its last Monetary Policy Meeting (MPC) of 2021 today.
The cost of living eased for the first time in six months in October on reduced transport costs, but a depreciating shilling and elevated food prices have renewed fears of a rise in inflation ahead of the festive season.
At its last bi-monthly meeting on September 28, the MPC shrugged off heightened global jitters and inflation fears to retain its benchmark lending rate at seven percent for the tenth time in a row.
It, however, noted it saw the need to closely monitor developments in inflation, adding that it stood ready to respond to any second-round effects.
Analysts said ahead of the crucial meeting that while inflationary pressure is likely to be at the forefront of the MPCs thinking, the base rate is unlikely to change for the remainder of the year, given that the rise is being driven by supply-side pressure.
“The MPC...may...repulse any expectations of a higher policy rate, due to rising inflation expectations, on the basis that the pressure is transitory,” said analysts at NCBA.
They also cite the need to also stimulate economic growth at a time when the country is still recovering from the negative effect of the Covid — a conundrum that complicates the conduct of monetary policy.
Despite the slight easing in inflation last month, the Kenya National Bureau of Statistics noted an increase in the cost of food and non-alcoholic beverages, housing, water, electricity, gas and other fuels on an annualised basis.
The higher costs are largely on account of dry weather conditions in more than 10 counties.
Food items such as maize flour, beef, oranges and onions were all on a rise with spinach, beans and Irish potatoes the only items in the KNBS basket that saw a drop in prices.
bnjoroge@ke.nationmedia.com
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