Johannesburg - The Central Bank of Kenya will wait until early next year before hiking interest rates again, having already loaded 300 basis points this year to bolster its currency and stave off inflation, a Reuters poll found.
The median forecast from 15 analysts, polled this week before the US Federal Reserve's crucial meeting later on Thursday, showed the central bank will keep the interest rate at 11.50 percent on Tuesday.
One economist predicted a 50 basis point hike and one a 100 basis point rise.
“After 300 basis points of hikes in June and July, we think that the CBK will opt to keep rates on hold in September,” said Alan Cameron, economist at Exotix in London.
“It is concerned about recent weakness in the shilling , but there is a limit to what higher interest rates can accomplish at this point - the CBK has made this clear - fiscal policy will need to do its part too,” added Cameron.
The median forecast from the poll was for the benchmark rate to rise to 12 percent in the first quarter of next year.
Kenyan Finance Minister Henry Rotich last month promised to cut the budget deficit to support the currency.
The International Monetary Fund has praised Kenya's policy to date, saying the Bank has acted appropriately by tightening rates and the economy remains on track despite pressure from rising global market volatility and local security challenges.
Currencies of major African economies from the Cape to Cairo have hit record lows this year as Chinese growth slows and the prospects of higher rates in the U.S. have central bankers using all sorts of tools and unorthodox methods to stem outflows.
Kenya has been mopping up shillings from money markets, making it expensive to hold dollars, while peers across the continent in Nigeria have implemented drastic capital controls to allow imports of only essential goods.
“The impact of the U.S. position will be known fully by October and that is when the global direction will be known: until then we believe the rates (in Kenya) will remain unchanged,” said Vimal Shah, CEO of the Bidco Group.
A separate poll on Wednesday, before Thursday's US monetary policy meeting, suggests the Fed will hold fire a bit longer on its first interest rate rise in nearly a decade.
East Africa
As for China, “non-resource intensive East African countries, Ethiopia and Kenya in particular, would likely be most resilient to a China slowdown in 2015,” said Rafiq Raji, an economist at macroafricaintelligence.com in Lagos.
Kenya's economy is expected to grow 5.8 percent this year, 6.0 percent next and 6.5 percent in 2017 - far better than heavy commodity exporters like Angola and Nigeria, which have much stronger trade links with China.
Such rates make Kenya a top performer in sub-Saharan Africa as the World Bank put regional economic growth at 4.2 percent this year.
Kenya's economy grew 4.9 percent in the first quarter of the year compared with a revised 4.7 percent a year ago, though a slowdown in tourism hampered growth.
Finance Minister Rotich also said farming - which makes up nearly a quarter of the economy - was expected to do better than last year due to good rains in the second quarter and tourism would pick up in the second half after Britain lifted security travel warnings.
REUTERS