February'23 Review
• Local Pump Prices Remained Constant - EPRA maintained the fuel prices constant for the next month despite a 2.81% decline in the landing cost of murban crude at 90.90 USD from 93.53 USD recorded in December. We also noted a continued difference in the USD exchange rate from CBK’s official quoted currency with the exchange rate coming in at KES 130.64//USD compared to the average CBK rate of KES 123.92/USD in January. Petrol will continue retailing at KES 177.30/litre, diesel at KES 162.00/litre and kerosene will continue at KES 145.94. Additionally, the price of diesel was cross-subsidized with that of petrol while the government maintained a KES 19.41/litre subsidy on Kerosene.
• Inflation Edged Up Contrary to Expectations - The headline inflation increased to 9.20% from 9.00% recorded in January. The increase was attributable to heightened food prices arising from unfavorable weather conditions during the month. Food inflation increased to 13.30% from 12.80% in January, Fuel inflation remained elevated at 13.80% and NonFood-Non-Fuel (Core Inflation) increased marginally to 4.40% from 4.30% in January. We expect headline inflation to remain under pressure and above the CBK’s upper target at least until Q2’23.
• Shilling Continued Losing Streak against USD - Kenya shilling continued to depreciate further against the USD to close at KES 126.86 versus KES 124.40 as at the end of January. We expect the shilling to remain under pressure due to dollar demand from energy importers, reduced dollar inflows, and dollar strength against frontier currencies.
What does March hold ?
• FY’22 Banking Sector Earnings Season - In the month of March, we await the release of FY’22 results for the Banking and Insurance sectors, and Bamburi Cement, among others. We anticipate favourable results with a higher dividend payment across the banking sector. Therefore, we expect investors to continue taking positions in the banking sector stocks.
• March MPC Meeting - The next meeting of the Monetary Policy Committee (MPC) will be held on March 29th 2023. We expect the committee to consider the impact of the previous decisions as well as monitor the prevailing macro factors.
