Bloomberg News

Kenya November Inflation Slows for 12th Month, Rate Cut Expected

November 30, 2012

Kenyan inflation slowed for the 12th consecutive month in November, increasing pressure on the country’s central bank to ease monetary policy further.

The inflation rate in East Africa’s largest economy dropped to 3.3 percent from 4.1 percent in October, the Nairobi-based Kenya National Bureau of Statistics said today in an e-mailed statement. Prices in the month rose 0.7 percent, the agency said.

“The main factor is economic growth,” Robert Gatobu, a dealer with Bank of Africa Ltd., said by phone from the capital, Nairobi, before the figures were published. “The bank has already reached the inflation target they’re looking for.”

Central bank policy makers have reversed a tight monetary stance adopted last year by cutting Kenya’s key lending rate 7 percentage points to 11 percent since July in a bid to spur expansion. While Kenya’s economy has been largely shielded from economic turmoil in one of its largest trading partners, Europe, economists have warned a sustained slowdown overseas could damage exports, remittances, aid and investment flows.

Lower interest rates in Kenya could boost the economy by strengthening domestic demand, Gatobu said. Pressure has also been mounting from consumers and businesses for cheaper credit before national elections scheduled for March 4.

Increases to the benchmark interest rate last year totaling 12.25 percent, to a record 18 percent, helped stabilize the currency after it fell to an all-time low of 106.75 a dollar and bring down inflation from a peak of almost 20 percent. Food prices have eased after good rains ended a drought in 2011.

The government is targeting about 5 percent inflation in the fiscal year through June.

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

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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