The EastAfrican
Date: 07.06.2015
Page 52
Article size: 314 cm2
ColumnCM: 69.77
AVE: 104666.66
Monetary policy team in a difficult position
It is difficult for a manager
or a committee to make a
over the past couple of years the nominees, the meeting
decision of far­reaching
porter of capital. The supply the region's ministers of
implications while second
guessing the top command.
side for foreign exchange is
at its weakest point in re­
cent times with the political
risks being brought home
That is exactly the position
Kenya's Monetary Policy
Committee finds itself in
where the US was a net ex­
as it convenes for an emer­
Tbe committee was
gency session to reflect on
widely expected to
nudge the Central
recent movements in the
three key market prices
— exchange rate, inflation
and interest rates.
Bank rate up
Before President Uhuru
by President Pierre Nku­
Kenyatta nominated the
fonr top executives who
standing for a third term
will lead the Central Bank
of Kenya for the next four
years (their approval by
parliament is seen as a for­
Mnality), the committee was
widely expected to nudge
the Central Bank Rate up by
about 50 basis points from
the 8.50 per cent that it has
obtained for two years now,
runziza's obstinacy over
in Burundi and the terrorist
threat stalking the region,
curtailing foreign direct
investments and tourism
flows.
Tbe scenario pointed to
a tighter policy stance un­
til Patrick Ngugi Njoroge
was nominated on Tues­
day night — State House
signalling to moneylenders made tbe announcement at
that they should make cred­ 10.49pm — to fill the posi­
it more expensive.
tion of Central Bank Gov­
The expectation was ernor left vacant by Prof
premised on the shilling's Njuguna Ndung'u three
continued slide against an months ago. Central Bank
American dollar bouyed by insider Haron Sirima and
indications that the sell­off former monetary policy
of public debt by the Fed­ committee member Sheila
eral Reserve, which had de­ M*MbiJiwe were nominated
pressed interest rates and to be his deputies. While it
encouraged investments is unlikely that committee
abroad was at an end. This members will make a de­
has in turn reversed a trend fining rate decision without
tbe slightest deference to
also comes two days before
finance read the national
budgets for the fiscal year
starting July. Kenya's steady
pursuit of economic expan­
sion would be checked by
a tightening stance, whose
imperative also appears to
have weakened since the
meeting was called.
Inflation dropped in
May after three months of
acceleration and is yet to
consistently hit the upper
limit of 7.5 per cent that
necessitates a rate increase
while the shilling appears
to have found its level af­
ter being tossed about from
the beginning of the year.
There has also been some
help from OPEC, which has
said it will not constrain oil
output, pointing to a softer
import bill.
Such indeterminate mar­
ket conditions tend to dic­
tate a safe bet on stability
rather than a drastic stance
as happened in November
2012 when the policy rate
was jerked up by 600 basis
points. Then, unlike now,
the shilling had lost sub­
stantial ground to a record
107 units to the greenback
in a matter of weeks and
the bank had a substantive
governor.
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
The EastAfrican
Date: 07.06.2015
Page 52
Article size: 314 cm2
ColumnCM: 69.77
AVE: 104666.66
Shoppers at a Nakumatt supermarket. The committee's decision could see tenders make credit
more expensive. Picture: SALMON NJAU
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya