Shared opinion on the monetary situation before the MPC meeting

Analysts are divided on the likely position of the Monetary Policy Committee (MPC) Wednesday after leaving the key rate at 9% at its last meeting on May 27.

The team said that, at the time, inflation had been contained and the foreign exchange market was stable.

Soaring prices of maize flour, beans and green grams among other foodstuffs pushed inflation to 5.7%, compared to 5.49% in June, thus canceling the temporary benefits on the cost of food. life induced by recent rainfall.

Analysts believe that a reduction in the central bank rate could be a key factor in injecting liquidity into a struggling economy.

"A cut in interest rates is needed to stimulate activity, but the hands are tied because our deficit makes a reduction dangerous because it would lead to inflation. The governor has a very difficult decision to make, "said Deepak Dave of Riverside Advisory Capital.

"50 basis points to boost, even 25 basis points will help," he said.

But according to Elizabeth Nkukuu, chief investment officer at Cytonn Investments, key macroeconomic fundamentals remain unchanged.

"We believe that the MPC will maintain its current policy, given that the macroeconomic environment is still relatively stable."

Jibran Qureshi, economist at Stanbic Bank for East Africa, said rate caps had complicated monetary policy, ruling out a cut.

"We do not see any change," Qureshi said.

"I think they're going to wait to get some clarification on the interest rate cap before providing any guidance on the future of their next policy change."

And in a meeting note prior to MPC, Sterling Capital researchers said the team would take a neutral stance.

In an interview with Bloomberg, Razia Khan, chief economist for the Standard Chartered Bank region for Africa and the Middle East, said that if the MPC panel was likely to keep the policy rate at 9 %, food prices and the weakening of the shilling against the dollar could add some. at inflationary pressures.