In brief
- The CBK Monetary Policy Committee (MPC) is scheduled to meet on 05 December 2024, and we see scope for a 50bps rate cut with the meeting coming at a more favourable time compared to a similar period a year ago.
- The MPC meeting will also have four new external members; appointed last month by the National Treasury Cabinet Secretary (CS). A long-standing issue with Kenya’s MPC setting is that the Committee is synonymous to a “one-man show”, with the Governor being the face of the Committee.
- Headline inflation in November came in at 2.8% y/y, and the combination of favourable base effect and the lagged impact of the previous tightening posture resulting in the disinflation trend. On a monthly basis, headline inflation rose gradually to 0.26% in November from 0.19% in September, limiting the slide in the preferred inflation print below the lower target.
- FX sales by commercial banks to the apex bank have somewhat improved KES liquidity. Given the Open Market Operations (OMO) biased towards liquidity injections, we have noted the amount of OMO instruments outstanding at any given point has reduced significantly. Considering this and coupled with elevated liquidity levels in select SOEs, demand for Treasury Bills has been outsized with a bid-cover ratio averaging 2.0x quarter-to-date compared to 1.2x in 3Q2024.
- We think the post MPC briefing on Friday will give colour to the non-committal by the fiscal authorities to the domestic bond switch auction as penciled in the FY25 Annual Borrowing Plan. Domestic borrowing outturn is currently ahead of the curve and giving authorities the flexibility to exercise the domestic liability management operations.
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