President William Ruto has set an ambitious goal to curb Kenyaโs inflation rate below 3 per cent, a move aimed at alleviating the rising cost of living and lowering borrowing costs.[โฆ]CLICK HERE TO READ THE FULL ARTICLEโถ
Speaking at Kenyatta International Convention Centre, Nairobi, for the Banking Industry Inua Biashara Small And Medium Enterprise Exhibition, on Wednesday, October 16, the President pointed to the governmentโs commitment to stabilising the economy, ensuring predictable exchange rates, and creating a more favourable environment for investment.
โโIt is my target that next year, inflation will be sub-three per cent. That is the target that we have. ย And as we bring down inflation and reduce the cost of living, we stabilize the exchange rates and make sure that we are much more predictable,โ stated President Ruto.
The target comes just two weeks after the country reported its lowest annual inflation rate in nearly 12 years, falling to 3.6 per cent in September, as food and energy prices moderated. Ruto expressed optimism that the lower inflation rate would help ease the financial burden on Kenyans by reducing everyday expenses and facilitating lower interest rates on loans.
The President stressed that lowering inflation is not merely about reducing numbers but has real-life implications for citizensโ purchasing power. โAs we bring down inflation and reduce the cost of living, we make sure that Kenyans can afford their basic needs without stretching their wallets,โ he asserted, adding that the move would also help the economy avoid unpredictable price hikes.
He also pointed out that stabilising the exchange rate would foster more investor confidence. โThe international financial system recognises that our fundamentals are right, and thatโs why we are seeing more inflows of investments into Kenya,โ Ruto remarked.
What it means
Economists have noted that the sub-3 per cent target could significantly reshape the financial landscape, potentially making credit more accessible to consumers. Lower inflation generally leads to lower interest rates, providing relief for debtors who often struggle to keep up with high repayment costs. It would also encourage businesses to invest and expand, spurring economic growth.
However, some analysts caution that setting such a low inflation target might not come without risks. For instance, overly aggressive monetary tightening to achieve the goal could stifle economic activity, especially if global factors like rising energy prices or geopolitical tensions push costs upward. The government will need to carefully balance policies to maintain economic momentum while keeping inflation in check.
The Central Bank will likely consider this new inflation target when making decisions on the countryโs monetary policy. Following its surprise decision to lower the benchmark interest rate in August, the bank has signalled that future rate adjustments will depend on inflation trends.
If the current downward trend continues, further rate cuts could be on the horizon, providing much-needed relief to consumers and businesses alike.
The recent reduction in inflation, driven by easing food and energy costs, has brought a sense of hope to many households struggling with high prices. While consumer prices rose by 0.2 per cent in September, the overall slowdown has sparked optimism that the worst may be behind Kenyans.
Financial experts, however, emphasise that core inflation, which excludes food and energy prices, remains a critical metric to watch. Although volatile items like food can cause fluctuations in the inflation rate, a sustained decline in core inflation would indicate that the governmentโs efforts are taking root across all sectors of the economyโฆCLICK HERE TO READ MORE ARTICLES>>>
