Here are our views on the news making headlines today for Kenya:
The Central Bank’s Monetary Policy Committee (MPC) is expected to hold its meeting today to evaluate key policy issues among them the Central Bank rate (CBR).
Our View: Although the committee walks a thin line in balancing the need to spur economic growth with cheaper credit, managing inflationary expectations as well as shoring up the Kenyan shilling, we believe that the CBR will be increased to support the weaker shilling which fell below KES 100/USD mark yesterday and contain future inflationary pressures. The galloping concern is the gaping current account deficit which will continue to pressurize the shilling exacerbating inflation rates above the government targets. For inflation to be contained at low levels there needs to be a corresponding growth in production. This means that a lot of the lending should be targeted towards improving productive capacity of manufacturers rather than creating purchasing power for consumer goods.