Kenya’s central bank to hold rates at 9.50% on May 29: Reuters poll

By Vuyani Ndaba

JOHANNESBURG (Reuters) – Kenya’s central bank will hold interest rates at 9.50% on Monday as authorities have probably done enough to slow consumer price rises, a Reuters poll found on Friday.

The central bank has lifted rates by 250 basis points in the past year, less than other parts of the continent like Ghana which held rates at 29.50% this week after hiking by a cumulative 1,600 basis points.

Inflation in Kenya dropped to an annual 7.9% in April from 9.2% a month earlier, helped by lower prices for some food items.

“In line with our view that central banks around the world will shift away from their hawkish stance over the coming quarters, we believe that the March 2023 meeting marked the end of Kenya’s tightening cycle,” said Lara Wolf, Sub-Saharan Africa Country Risk Analyst at Fitch Solutions.

All but one of nine analysts polled in the past week said interest rates will not be changed on May 29, with the other expecting a 25 bp increase.

The West African nation, a producer of cocoa, gold and oil, has been grappling with its worst economic crisis in a generation, characterised by rampant inflation and a sharply weaker cedi currency.

Wolf expects inflationary pressure in Kenya to ease further during the rest of the year, which, along with weaker growth prospects, will reduce the need for further monetary tightening.

Aly-Khan Satchu, an economic analyst and CEO of investment adviser Rich Management, also reckons the Central Bank of Kenya will keep rates steady before a new governor takes over, with Patrick Njoroge’s eight-year tenure ending in June.

Two senior economic advisers to Kenya’s president are among a shortlist of six who will be interviewed for the job. The next governor will face the challenge of a heavy government debt burden which is threatening to upend years of macro stability.

The U.S. Federal Reserve recently signalled it may pause its tightening cycle after raising rates by 500 basis points over the last 14 months, its most aggressive monetary policy tightening since the 1980s.

South Africa’s Reserve Bank raised its main interest rate on Thursday to a 14-year high, a move Governor Lesetja Kganyago described as “bitter medicine” needed to tame inflation.

(Reporting by Vuyani Ndaba; Editing by Kirsten Donovan)