Central Bank sees inflation easing in two months

Inflation rate will remain above the government’s target range in the next two months and then ease back towards it, central bank governor Patrick Njoroge said on Tuesday.

Year-on-year inflation surged to 9 percent last month after a drought drove up food prices.

The target range is 2.5-7.5 percent.

Policymakers held the benchmark lending rate at 10.0 percent for the third time in a row on Monday, saying there was no demand-driven inflation risk.

The bank’s monetary policy committee said it was concerned by the impact of a cap on commercial rates, imposed by the government last September. The cap worsened already sluggish private sector credit growth.

Njoroge said there were signs the growth of credit could be starting to inch up, after stabilising at about 4.5 percent year-on-year in December.

“We expected it to be 5.5 percent this month but let’s see,” he said.