CBK warns on dangers of oil prices, weather to inflation

The Central Bank of Kenya (CBK) has warned that global oil prices and weather could still pose a risk to the country’s inflation levels. 

CBK, in its latest market perception survey released on Tuesday, said banks expected inflation to average at 5.8 per cent while non-banking private sector firms said inflation would be at about 5.7 per cent this year.

“The anticipation of favourable weather conditions and low food prices, the reduced cost of electricity, the low level of international oil prices and a stable shilling are expected to support low inflation in the next 12 months,” said CBK.

The survey is undertaken every two months to obtain perceptions of banks and non-bank private sector firms on selected economic indicators. CBK said local firms expect prices of different inputs to remain stable in the course of the year.

Among the factors that companies took into consideration included the cost of food and energy.

“Respondents, however, pointed out that inflation during this period would depend highly on the weather pattern in 2019, which was yet to be published by the Meteorological Department,” said the regulator.

“Upward pressure on inflation would be expected if agricultural production was compromised due to inadequate or delayed rains, and volatility in international oil prices.”

A bumper harvest of maize helped ease the cost of living in January, according to Kenya National Bureau of Statistics.

An increase in the supply of major food commodities saw the prices of a basket of highly consumed goods and services increase at a slower rate of 4.7 per cent in the period under review compared with 5.71 per cent in December. Maize grain recorded a drop of 40.6 per cent in January 2019.