October Inflation Rate To Hit 8.8%


October Inflation Rate To Hit 8.8% – Cytonn

By Soko Directory Team / Published October 24, 2022 | 9:54 am

KEY POINTS

For the period between 14th October 2022 to 15th November 2022 the prices of Super Petrol, Diesel, and Kerosene declined by 0.6, 1.2, and 0.7 percent to 178.3, 163.0, and 146.9 shillings per liter from 179.3, 165.0, and 147.9 shillings per liter, respectively.

“We are projecting the y/y inflation rate for October 2022 to fall within the range of 8.4 -8.8 percent,” said Cytonn Investments in their latest report.

The inflation rate will be pegged on the:

The decline in fuel prices: For the period between 14th October 2022 to 15th November 2022 the prices of Super Petrol, Diesel and Kerosene declined by 0.6, 1.2, and 0.7 percent to 178.3, 163.0, and 146.9 shillings per liter from 179.3, 165.0, and 147.9 shillings per liter, respectively.

Upward Revision of the Central Bank Rate (CBR): During the September sitting, the Monetary Policy Committee increased the CBR by 75 bps to 8.25 percent, from the previous 7.50 percent with the aim of anchoring inflation with the rate having marked a 5-year high in the month of September.

“In our view, the decline in fuel prices is expected to have a ripple effect on the prices of other commodities given that fuel is a major input in most sectors.

Additionally, we expect maize prices to fall as we enter the harvesting season and consequently lead to a decline in the food index as maize flour is a significant contributor to the index.

We also expect the MPC’s decision to hike the borrowing rates by 75 bps to 8.25 percent in September to ease the inflationary pressures on commodities by reducing consumer spending,” said Cytonn.

Rates in the Fixed Income market have remained relatively stable due to the relatively ample liquidity in the money market.

The government is 8.7 percent behind its prorated borrowing target of Kshs 180.6 bn having borrowed 164.9 billion shillings of the 581.7 billion shillings borrowing target for the FY’2022/2023.

We expect sustained and gradual economic recovery as evidenced by the revenue collections of Kshs 486.0 bn in the FY’2022/2023, equivalent to 22.7 percent of its target of 2.1 trillion shillings.

Despite the performance, we believe that the projected budget deficit of 6.2 percent is relatively ambitious given the downside risks and deteriorating business environment occasioned by high inflationary pressures.

About Soko Directory Team

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