November Inflation To Hit 10.1%

November Inflation To Hit 10.1% – Cytonn

By Soko Directory Team / Published November 28, 2022 | 9:05 am

KEY POINTS

The fuel prices for the period between 14th November 2022 to 15th December 2022 declined by a slight 1.0 shillings to 179.3 shillings per liter, 162.0 shillings per liter, and 145.9 shillings per liter from 178.3 shillings per liter, 163.0 shillings per liter and 146.9 per liter for Super Petrol, Diesel, and Kerosene.

KEY TAKEAWAYS

The Monetary Policy Committee raised the Central Bank Rate to 8.75 percent, from the previous 8.25 percent with the aim of anchoring the inflation rate which has continued to increase over the last ten months.

Despite the MPC increase, we still believe that the inflationary pressures are due to external shocks, and a decline is largely pegged on how soon global supply chains stabilize.

“We are projecting the y/y inflation rate for November 2022 to fall within the range of 9.7-10.1 percent,” said Cytonn Investments in their latest report.

The inflation will be pegged on the:

High fuel prices: The fuel prices for the period between 14th November 2022 to 15th December 2022 declined by a slight 1.0 shillings to 179.3 shillings per liter, 162.0 shillings per liter, and 145.9 shillings per liter from 178.3 shillings per liter, 163.0 shillings per liter and 146.9 per liter for Super Petrol, Diesel, and Kerosene.

However, fuel prices remain high and are expected to remain elevated due to the partial removal of the fuel subsidy program by the new regime coupled with global supply constraints.

Given that fuel is a major input to most sectors, we expect the high prices to weigh on the inflation basket in the short term.

Increasing food prices: This was evidenced by the 15.8 percent y/y increase in the prices of food & non-alcoholic beverages as of October 2022 due to increased costs of production, uneven weather patterns, and drought affecting food production.

Given that the index constitutes 32.9 percent of the inflation basket, we expect the prevailing high food prices to exert pressure on the inflation rate.

“In our view, we expect the inflationary pressures to remain high mainly due to the high fuel and food prices. We also expect food prices to remain elevated for the short term, given the uneven weather patterns and drought.

Notably, the Monetary Policy Committee raised the Central Bank Rate to 8.75 percent, from the previous 8.25 percent with the aim of anchoring the inflation rate which has continued to increase over the last ten months.

Despite the MPC increase, we still believe that the inflationary pressures are due to external shocks, and a decline is largely pegged on how soon global supply chains stabilize.”

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