Bloomberg News

Kenya Inflation Slows to 3.2%, Third Drop in 4 Months (Update2)

July 01, 2010

Kenya’s inflation rate fell for the third time in four months, reaching 3.2 percent in June and raising the prospect of further interest rate cuts.

Inflation in East Africa’s biggest economy slowed from 3.9 percent the month before, the Nairobi-based Kenya National Bureau of Statistics said in an e-mailed statement today. Prices fell 0.4 percent in the month.

“There is scope for the central bank to continue lowering their benchmark rate,” Ben Nyamweya, an independent financial analyst, said by phone from Nairobi today.

The Central Bank of Kenya, which targets inflation of 5 percent, kept its key rate at 6.75 percent on May 20, after commercial banks slashed their lending rates and the outlook for the economy picked up. The bank has cut rates five times since the start of last year. The bank’s monetary policy committee will probably hold its next meeting this month.

Policy makers may “continue to keep low rates,” Robert Bunyi, managing director of Nairobi-based Mavuno Capital, said before the rate announcement. “Inflation is likely to stay fairly benign through the second quarter.”

Price growth has fallen from 17.9 percent in September after the statistics bureau changed the way it’s calculated.

Kenya’s economy will grow about 4.5 percent this year and 5.7 percent in 2011 as agricultural production picks up following good rains, Finance Minister Uhuru Kenyatta said during his budget speech on June 10.

Kenya is the world’s largest exporter of black tea.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.


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