NAIROBI, Kenya, Jul 26 – Kenya’s overall inflation is expected to remain within the government’s target range in the short-term, in spite of expectations of temporary upward pressures on consumer prices.
This is according to Central Bank’s Governor Dr Patrick Njoroge who attributed it to recent increases in fuel tax.
Njoroge was addressing members of the press following Monday’s Monetary Policy Committee meeting which saw a revision of the Kenya Banks Reference Rates (KBRR) to 8.90 percent from 9.87 percent.
“Overall inflation increased in June largely due to increases in prices of food items, but remained within the government’s target range. Non-food-non-fuel inflation has continued to decline,” Njoroge said.
Broken down, the overall inflation rose to 5.8 percent in June from May’s 5.0 percent. Food’s inflation on one hand rose to 8.9 percent up from 6.6 percent. On the other hand, non-food-non-fuel (NFNF) dropped from May’s 5.4 percent to June’s 5 percent.
Additionally, Njoroge that international oil prices have been volatile, implying risks to inflation.
On matters exchange rate developments, Njoroge noted that the Kenya Shilling had managed to remain stable before after Brexit.
“Brexit has so far not affect Kenya’s economy, there hasn’t been any negative shock experienced. This is despite the weakening of the Sterling Pound.”
He however said that in the medium term, Brexit might lead to implications that include the impact of the uncertainty surrounding how Brexit will work going forward and the unexpected outcomes.
“Investors will therefore be much more cautious as there is now a wait and see kind of atmosphere. Hence foreign direct investment inflow may be affected ion the medium term, should it take place.”
Further on exchange rate developments, Diaspora remittances inflows were noted to remain strong, supporting the current account balance. Additionally, CBK reserves together with the precautionary arrangements with the International Monetary Fund continue to provide adequate buffer against short-term shocks.
With regards to the decline in global growth, Njoroge said the effects in Kenya will be also minimal as the country is quite resilient. He said that Kenya’s diverse variety of produce enables it to remain strong economically despite what happens to economies in blocks such as those in the European Union.
“This why the global decline in commodity prices did not affect us much as we have foreign direct investment coming from other places, not just the European Union.”