Kenya’s new central bank governor vowed to battle sticky inflation amid growing complaints about prices and protest threats over the rising cost of living in the East African economy.
(Bloomberg) — Kenya’s new central bank governor vowed to battle sticky inflation amid growing complaints about prices and protest threats over the rising cost of living in the East African economy.
In his first briefing since becoming governor of the central bank last week, Kamau Thugge said it was “critically important” for the monetary authority to address price stability in line with its mandate.
“Inflation is almost like a tax because it reduces everybody’s real incomes,” he said Tuesday, a day after the monetary policy committee raised the benchmark central bank rate by 100 basis points to 10.5% at an unscheduled meeting.
“The cost of living is one of the issues that has concerned the country and therefore it is critically important that we address inflation because everybody is affected, even those who don’t have incomes,” he said.
The rate of price growth jumped to 8% in May, a surprise outcome given the central bank projected 7.1%, according to Thugge. The earlier prospects of lower inflation supported the MPC’s decision to leave the rate unchanged at 9.5% at its May meeting presided over by his predecessor Patrick Njoroge whose eight-year tenure ended on June 17, he said.
Read More: Kenyan Inflation Seen Back in Target Range in August, September
The central bank is “very concerned” about core price growth, which has remained above 3% since June 2022, indicating persistent inflationary pressures in the economy. The MPC’s “strong measures” to increase the interest rate on Monday was in view of non-food, non-fuel inflation rising above 4%, Thugge said.
It’s still too early to gauge whether the hike marks a change in the monetary policy stance, according to Mpho Molopyane, an economist at Absa Group Ltd.
“Against the deteriorating inflation backdrop, we now expect the MPC to hike the policy rate by a further 100 basis points by the year end, with risks tilted toward more aggressive tightening,” she said in a note.
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