Kenyans should expect the inflation rate for the month of June to fall between 4.50 and 4.70 percent according to predictions given by Genghis Capital.
“We expect a headline inflation print between 4.50% – 4.70% attributed to the y/y base impact and also the effect of runaway fuel inflation,” said Genghis.
Fuel inflation touched 11.40 percent on a year-to-year basis during the month of May (3.50% y/y in May 2017) propelled by rising global oil price together with the first round impact of the logging ban.
On the other hand, core inflation remains muted (3.90 percent y/y in May). In a 1Q18 period, core inflation averaged 3.63 percent (4.21 percent in 1Q17) while producer price index inflation hit 1.53 percent (3.38% in 1Q17); an indicator of reduced demand in both consumption and production.
However, private business sentiment has been optimistic as measured by the Purchasing Managers Index (PMI) which averaged 54.43 in 1Q18 (50.20 in 1Q17). Overall, we view 1Q18 GDP Growth rate will settle between 5.00 – 5.50 percent.
Secondary market turnover edged up 24.72 percent on Thursday to close at 2.35 billion shillings.
Activity was spread out across the yield curve, coupled with an interest in infrastructure papers, but we expect a subdued trading session today as we clock the end of 2Q18.
The average interbank rate remained steady at 6.6425 percent. USDKES pair closed at 101.13 level. “We view the end-month corporate demand balanced with foreign inflows and as such, we expect the currency pair to oscillate at current levels,” said Genghis.
On the T-Bill auction, overall performance settled at 126.01 percent (30.24 billion shillings) with CBK accepting 26.77 billion shillings. Yields increased 0.8bps to 7.733 percent on the 91-day tenor while declined 4.9bps to 10.488 percent on the 364-day tenor.