Global oil prices have surged once again, but despite the upward trend, the Kenya shilling has held steady, maintaining stability against major foreign currencies, according to the Central Bank of Kenya (CBK).
In its weekly bulletin on October 4, the CBK said the increase in international oil prices was reported during the week ending October 3.
The rise in the global oil prices is attributed to growing global oil demand alongside a reduction in supply.
“The price of Murban oil increased to USD 76.54 on October 3, from USD 72.64 on September 26,” CBK stated.
CBK said the increase in global oil prices was mainly driven by uncertainties from the escalation of the conflict in the Middle East.
Kenya Shilling Remaining Stable as Global Oil Prices Rise
At the same time, the Kenya Shilling remained stable against major international and regional currencies during the week ending October 3.
It exchanged at Ksh 129.19 per US dollar on October 3, compared to Ksh 129.19 per US dollar on September 26.
Kenya’s foreign exchange reserves rose for the sixth straight week to hit a near two-year high of 8.19 billion U.S. dollars.
The forex reserves have sustained an upward trajectory since the start of September, rising from 7.5 billion dollars, an equivalent of 3.9 months of imports.
“The usable foreign exchange reserves remained adequate at 8.19 billion U.S. dollars (4.2 months of import cover). This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover,”CBK noted.
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According to the bulletin, global inflation concerns have continued to ease in advanced economies.
Eurozone inflation declined from 2.2 percent in August to 1.8 percent in September, mainly on account of declining energy prices.
The U.S. dollar index strengthened by 1.5 percent against a basket of major currencies during the week ending October 3.
Country’s Inflation Rate
At the same time, Kenya’s overall inflation declined to 3.6 percent in September 2024 from 4.4 percent in August, largely on account of a significant decrease in fuel inflation.
Fuel inflation declined to 1.1 percent from 4.7 percent in August, mainly driven by decreases in pump, electricity, and cooking gas/LPG prices.
Moreover, food inflation declined to 5.1 percent from 5.3 percent in August, reflecting a decline in vegetables inflation, while non-food-non-fuel inflation decreased to 3.4 percent in September from 3.5 percent in August.
Additionally, the Gross Domestic Product (GDP) growth decelerated to 4.6 percent in the second quarter of 2024 from 5.6 percent in a similar quarter of 2023.
The slowdown was reflected across all sectors of the economy except manufacturing, wholesale and retail trade, health and professional services.
The agriculture sector grew by 4.8 percent compared to 7.8 percent in similar quarter of 2023.
As a result, the services sector recorded a growth of 5.5 percent compared to 6.8 percent and contributed 3.1 percentage points to real GDP.
Also, the industrial sector growth decelerated to 0.6 percent from 1.4 percent in the second quarter of 2023.
Also Read: Kenyan Shilling Falls Against Major Global Currencies
Money Market
Liquidity in the money market remained adequate during the week ending October 3, supported by open market operations.
Commercial banks’ excess reserves stood at Ksh 21.0 billion in relation to the 4.25 percent cash reserves requirement (CRR).
The average interbank rate was 12.71 percent on October 3 compared to 12.70 percent on September 26.
During the week, the average number of interbank deals decreased to 33 from 45 in the previous week, while the average value traded decreased to Ksh 17.4 billion from Ksh 26,7 billion in the previous week.
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