Why MPC is likely to retain signal rate at 9.0%

The Monetary Policy Committee (MPC) is set to meet tomorrow, the last MPC meeting in 2018, with analysts predicting there is unlikely to be a change in the direction of the Central Bank Rate (CBR), which currently stands at 9.0%.

In an MPC Note, Cytton Investments says of the six factors that they track, one is negative, two are neutral, and three are positive, with no change since the last MPC meeting.

“We believe that the MPC should adopt a wait and see approach, given the macro-economic environment is relatively stable,” the note says.

According to Cytton, despite expectations of inflationary pressure in the remainder of the year as the effects of the various tax policy measures introduced through the Finance Bill 2018 continue to be felt, we do not believe that the pressure is high enough to warrant a policy shift. Inflationary pressure has further been mitigated by the declining food prices due to the improved weather conditions and as such, inflation is expected to be within the government set target of 2.5%-7.5%.

Despite the recent depreciation of the Kenyan Shilling against the US dollar, Cytton also says it has remained relatively stable, reflecting a more stable economic environment, which saw the IMF reclassifying Kenya, from a floating arrangement to stabilized arrangement, in their Annual Report on Exchange Arrangements and Exchange Restrictions released on 30thApril 2018.

“The classification of the arrangement, is primarily based on the degree to which the exchange rate is determined by the market- rather than by official action. For a country to be classified as a stabilized arrangement, the market exchange rate should remain within a margin of 2.0% for 6 months or more with respect to a single currency or a basket of currencies, thus showing the stability of the Kenyan shilling,” it says.

It adds that volatility of the Kenyan shilling has however mainly been cushioned by central Bank’s activities, which has seen the forex reserves decline by 4.4% to USD 8.1 bn from USD 8.4 bn, since the last MPC meeting but still remain high and above the optimal level of reserves for Kenya as per the IMF set at 3.5 months of imports . The ongoing prospects of the Treasury issuing another Eurobond could also eliminate the need for tightening the monetary policy, as it will enhance the forex reserves thus cushioning the shilling.

Block 5

READ: DAVID MAKALI REVEALS WHY HE IS LEAVING THE STAR

At the same time, private sector credit growth has remained unchanged at 4.3% for the 3 months to September, since the lowering of the CBR to 9.0% in July, higher than the 3.3% average for the 9 months to September 2018 as well as the 2017 average of 2.5% but is still below the 5-year average of 12.6%

 

Latest

Equitel First to Launch 5G Banking Services in Africa

Equitel, Finserve's mobile virtual network operator (MVNO), has announced the launch of its cutting-edge fifth generation (5G) capabilities in collaboration with their host mobile network operator-Airtel.

Mary Njeri: I Saved Sh750,000 Working as a Maid … then Mum Squandered it

Although Mary Njeri did not have the required documents, an agent helped her obtain them and off she left for Saudi Arabia.

KCB, MasterCard Deal Sets Pace for Payments in East Africa

KCB, MasterCard have signed a five-year strategic collaboration framework that will see cardholders across East Africa benefit from enhanced value propositions.

Ifeanyi Odoh Appointed New Schneider Electric Kenya Country President

Schneider Electric™ Kenya has appointed Ifeanyi Odoh as its...

Follow Us

Newsletter

Don't miss

Throwing The Girls Into Deep End: Single Kiasi S3 First Look

Nairobi’s dating scene is about to get messy: Single Kiasi...

Win New Year Crossover Mugithi Tickets With Odibets

The event has attracted prominent Kikuyu musicians who will be headlining the event including Samidoh and Muigai wa Njoroge.

For Coloured Girls is Theatre Production of the Year

The play ‘For Coloured Girls (who have considered suicide/ when...

Tusker Oktobafest Rolls East African Cultures into One

From regional events across Kenya to inaugural gatherings in Uganda and Tanzania, and the Tusker Oktobafest grand finale in Nairobi, the festival harmonized traditions, celebrated diversity, and highlighted the rich cultural tapestry of the East African culture

Lupita’s Little Brother Junior Nyong’o Charting His Own Path in Acting

Junior Nyongó, who is also a musician and a DJ and now a graduate of UC San Diego with an MFA in Acting, is crafting his own solid path in the world of acting with roles in major theatre productions.

Safaricom To Power Tusker OktobaFest Beer Festival

Safaricom’s involvement in OktobaFest as a technology and payments partner will focus on fostering seamless in-festival connectivity, empowering the youth and Gen Z community through Safaricom Hook, and powering digital payments through M-PESA.

Music Producers Launch Organization To Streamline Recording Industry

Recording Industry of Kenya (RIKE) was launched on 9th October 2023. Registered in 2022 as a not-for-profit organization, RIKE aims to promote the collective interests of producers of sound recordings in the country.

Nairobi’s Hero Bar Listed Among World’s 50 Best Bars

World Best Bars: Hero Bar in Nairobi continues to climb the list, moving up six places to No.62 and Johannesburg’s Sin + Tax comes in at No.94. Dubai new entry Ergo is at No.69 and Melbourne’s Byrdi has re-entered the list at No.61.

Kenyan DJs Face Off In Smirnoff Battle Of The Beats Season 3

The Smirnoff Battle of the Beats Season 3, a DJ competition, is poised to unleash an unprecedented musical frenzy countrywide.

The Highs And Lows Of Betty Kyallo, Sisters Show As Season 2 Ends

Kyallo Kulture has always been, above all, about sisterhood, and in Season 2 we have witnessed the charm of it - the ups that gave us wholesome moments as the sisters led by Betty Kyallo spent time together.
BT Reporter
BT Reporterhttp://www.businesstoday.co.ke
editor [at] businesstoday.co.ke

Equitel First to Launch 5G Banking Services in Africa

Equitel, Finserve's mobile virtual network operator (MVNO), has announced the launch of its cutting-edge fifth generation (5G) capabilities in collaboration with their host mobile network operator-Airtel.

Mary Njeri: I Saved Sh750,000 Working as a Maid … then Mum Squandered it

Although Mary Njeri did not have the required documents, an agent helped her obtain them and off she left for Saudi Arabia.

KCB, MasterCard Deal Sets Pace for Payments in East Africa

KCB, MasterCard have signed a five-year strategic collaboration framework that will see cardholders across East Africa benefit from enhanced value propositions.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here