NAIROBI, Kenya, Aug 13 – The Central Bank of Kenya (CBK) expects inflation to rise to about eight percent if global oil prices average $110 per barrel amid a prolonged Middle East conflict.
Speaking during a post-Monetary Policy Committee (MPC) briefing, CBK Governor Kamau Thugge said such a rise would push inflation slightly above the Government’s target range of between 2.5 and 7.5 percent.
“I think if the conflict lasts longer and if oil prices were to go to $110, then it’s possible that the headline inflation would exceed or go above the upper end of our target,” Thugge said.
“Not by very much. We expect maybe it could go up to 8%. But that is under the circumstances where oil prices average about 110 dollars per barrel.”
Kenya’s inflation rose slightly to 6.5 percent in July from 6.4 percent in June, driven by higher food prices and electricity costs.
However, Thugge said the CBK’s baseline scenario is for global oil prices to average about $90 per barrel if the Middle East conflict does not escalate.
“Our baseline scenario for the oil prices is for them to be at around $90 per barrel. The assumption that we have looked at is where the price rises to $110 and where the price comes down to $70, and of course coming down to $70 is entirely possible,” Thugge said.
