Inflation For November To Fall Between 5.2 and 5.4 Percent

“We are projecting the Y/Y inflation rate for the month of November to come in within the range of 5.2 – 5.4 percent compared to 5.0 percent recorded in October,” said Cytonn.

According to experts from Cytonn Investments, the Y/Y inflation for the month of November is expected to rise due to the base effect.

During the month, there has been an increase in the food and non-alcoholic beverages index, which has a weighting of 36.0 percent mainly driven by the higher food prices especially grain and flour prices, as well as milk prices.

“We also expect an increase in the transport index following the 2.4% and 2.6% increase in petrol and diesel prices, respectively, during the month,” Cytonn added.

There has also been an increase in the housing, water, electricity, gas, and other fuels index following the 2.9 percent increase in kerosene prices to 104.1 shillings from 101.1 shillings in October.

“Going forward, we expect the inflation rate to remain within the government set range of 2.5 – 7.5 percent.”

Rates in the fixed income market have remained relatively stable as the government rejects expensive bids.

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“We expect an improvement in private sector credit growth considering the repeal of the interest rate cap.”

This will result in increased competition for bank funds from both the private and public sectors, resulting in upward pressure on interest rates.

“Owing to this, our view is that investors should be biased towards short-term fixed-income securities to reduce duration risk,” said Cytonn.

During the week, the average interbank rate dropped to 3.4 percent from 3.6 percent recorded the previous week, pointing to increasing liquidity in the money markets, supported by net redemption of government securities.

This saw commercial banks excess reserves come in at 11.7 billion shillings in relation to the 5.25 percent cash reserves requirement (CRR).

The average interbank volumes increased by 42.0 percent to 18.0 billion shillings from 12.7 billion shillings recorded the previous week.