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Nov Inflation update: 19.72% up from 18.9% in Oct
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Cde Monomotapa
#21 Posted : Tuesday, November 29, 2011 7:44:10 PM
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Joined: 1/13/2011
Posts: 5,964
@Mainat I remember you being a strong proponent of steep rate hikes early this year. What changed? smile
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Mainat
#22 Posted : Tuesday, November 29, 2011 7:55:10 PM
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Joined: 11/21/2006
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Cde Monomotapa wrote:
@Mainat I remember you being a strong proponent of steep rate hikes early this year. What changed? smile

Timing and continuum. I was calling for interest rate rises when they should have happened i.e. in Feb/March when it was clear the economy was overheating. My understanding of steep hike is going from 6.25% to 11% because the 5% will feed through straight away. That didn't happen and when CBK eventually read my advice (joking, it got an IMF diktat), it over-corrected the situation. We are now in great danger of pitching the economy into recession.
Sehemu ndio nyumba
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Cde Monomotapa
#23 Posted : Tuesday, November 29, 2011 8:06:58 PM
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Joined: 1/13/2011
Posts: 5,964
Mainat wrote:
Cde Monomotapa wrote:
@Mainat I remember you being a strong proponent of steep rate hikes early this year. What changed? smile

Timing and continuum. I was calling for interest rate rises when they should have happened i.e. in Feb/March when it was clear the economy was overheating. My understanding of steep hike is going from 6.25% to 11% because the 5% will feed through straight away. That didn't happen and when CBK eventually read my advice (joking, it got an IMF diktat), it over-corrected the situation. We are now in great danger of pitching the economy into recession.

Ok.
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guru267
#24 Posted : Tuesday, November 29, 2011 10:02:41 PM
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Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
Mainat wrote:
I still maintain that raising CBR again to tackle inflation that is caused by supply side issues (rain->food which is still the largest component)is idiocy. Especially because people won't stop spending on food just because interest rates are going up.


Spoken like a true economist.

A growing frontier like kenya should not be worried over currency depreciation and wide fiscal deficit because it is in a growth phase and the importation of capital assets and consumer goods not yet present in the country is simply a normal phase which all Asian Tigers went through. Including high government spending.

I maintain that inflation in kenya is being driven higher and higher by FOOD, FUEL, & ELECTRICITY... Only the rains can save us now..

But Even if the CBK raises the bank rate to 40% at the next MPC meeting these figures will not change...

Solution: Boost and maintain irrigation & boost and maintain geothermal power generation and the long term prospects will improve...
Mark 12:29
Deuteronomy 4:16
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Scubidu
#25 Posted : Tuesday, November 29, 2011 11:05:39 PM
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Joined: 9/4/2009
Posts: 700
Location: Nairobi
Every single category in the index except for food and education was up this month. Inflation should start coming down in February, starting with food and then fuel prices (the supply side correction)-hopefully favourable based effects will see 2012 inflation end well.

The high interest rates will hopefully deter the secondary effects of currency devaluation and we'll hopefully see more capital inflows. This over-correction can be reversed in later months.

Once bank credit starts to contract we'll get a better idea of real sector NPL ratios (for those who have invested in banking stocks). More importantly the real estate sector is likely to suffer slowly impacting everyone.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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the deal
#26 Posted : Tuesday, November 29, 2011 11:10:00 PM
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Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
@guru @mainat I will give you one referance Asia Financial Crisis of 97..thats what currency depreciation did to the so called miracle economies of Asia...also read about my article written 7 month ago and how it sounds real today..the weak KES has a ripple effect on the Kenyan economy...farming inputs, oil etc are all imports paid in Dollars...even if there is rain..this input costs have to be passed tn consumers which results in higher prices in fact if CBR was not hiked the KES would be at 120 by now and by Q1 2012 we will be talking of a recession.The Asians are also exporters not net importers...this problems will persist unless Kenyan economy is retooled..encouqage manufacturing.
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Scubidu
#27 Posted : Tuesday, November 29, 2011 11:53:34 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
guru267 wrote:
Mainat wrote:
I still maintain that raising CBR again to tackle inflation that is caused by supply side issues (rain->food which is still the largest component)is idiocy. Especially because people won't stop spending on food just because interest rates are going up.


Spoken like a true economist.

A growing frontier like kenya should not be worried over currency depreciation and wide fiscal deficit because it is in a growth phase and the importation of capital assets and consumer goods not yet present in the country is simply a normal phase which all Asian Tigers went through. Including high government spending.

I maintain that inflation in kenya is being driven higher and higher by FOOD, FUEL, & ELECTRICITY... Only the rains can save us now..

But Even if the CBK raises the bank rate to 40% at the next MPC meeting these figures will not change...

Solution: Boost and maintain irrigation & boost and maintain geothermal power generation and the long term prospects will improve...


Consecutive large current account deficits lead to currency devaluation and it was a private sector led boom that led to the Asian Financial Crisis. They were largely financed the deficit with debt and not equity (except Malaysia), coupled with the fact that the deficit was being financed externally. Goes back to the fact that when you can no longer finance your deficit, your credibility with lenders diminishes.

In a country like ours where savings are declining at a rapid pace should interest rates be high or low? Maintaining import levels is good especially with it's capital goods, but not such at a time when the World Bank/IMF has made ur wallet look fat for the last two years. It implies dependence.

If indeed infrastructure projects yield high returns then let's see if we attract FDI flows. The solution, your long term infrastructure prospects would be greatly aided by foreign private inflows because you could create growth and finance your imports.

my 2 cents.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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hisah
#28 Posted : Wednesday, November 30, 2011 12:16:53 AM
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Joined: 8/4/2010
Posts: 8,977
@Scubidu - who's in charge of the econ - cbk or IMF/World bank? You can complain all you want, but who's calling the shots??
$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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kizee1
#29 Posted : Wednesday, November 30, 2011 10:56:59 AM
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Joined: 9/29/2010
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Location: nairobi
hisah wrote:
@Scubidu - who's in charge of the econ - cbk or IMF/World bank? You can complain all you want, but who's calling the shots??



cbk is in charge, however CBK is a subsidiary of the IMF/WB
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Scubidu
#30 Posted : Wednesday, November 30, 2011 11:40:29 AM
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Posts: 700
Location: Nairobi
kizee1 wrote:
hisah wrote:
@Scubidu - who's in charge of the econ - cbk or IMF/World bank? You can complain all you want, but who's calling the shots??



cbk is in charge, however CBK is a subsidiary of the IMF/WB


@hisah. IMF/WB are important creditors. So when u have a currency crisis key creditors will try to call the shots. If indeed you want to import to build infrastructure in Kenya... if foreign private investments were funding infrastructure then you can tell IMF/WB to go stuff themselves. But u can't borrow from them then tell them not to interfere. Even if they shouldn't call the shots then isn't there some sort of moral hazard from borrowing from someone and not being accountable for it.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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guru267
#31 Posted : Wednesday, November 30, 2011 9:14:04 PM
Rank: Elder


Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
Scubidu wrote:
Consecutive large current account deficits lead to currency devaluation and it was a private sector led boom that led to the Asian Financial Crisis. They were largely financed the deficit with debt and not equity (except Malaysia), coupled with the fact that the deficit was being financed externally. Goes back to the fact that when you can no longer finance your deficit, your credibility with lenders diminishes.

If indeed infrastructure projects yield high returns then let's see if we attract FDI flows. The solution, your long term infrastructure prospects would be greatly aided by foreign private inflows because you could create growth and finance your imports.

my 2 cents.


@Scubidu my plan is very short term in the bigger scope of things.. You cannot honestly expect the private sector and foreigners to come running to fund building of roads, bridges, power, health care etc..

First of all we all know what prices kenyans will pay if these are in the hands of the private sector & foreigners (kplc gives a small taste everyday)

Secondly as long as infrastrucrure borrowing to finance the deficit remains domestic there aint much of a problem.. ,(site japan)

When the infrastructure is up and the importation cools we will be begging the currency to depreciate to boost exports... (site asia)

Mark 12:29
Deuteronomy 4:16
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guru267
#32 Posted : Wednesday, November 30, 2011 9:38:53 PM
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Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
Stagflation!! Unless these guys get their act together..

www.businessdailyafrica....8/-/dmq706z/-/index.html
Mark 12:29
Deuteronomy 4:16
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hisah
#33 Posted : Wednesday, February 29, 2012 9:00:50 AM
Rank: Chief


Joined: 8/4/2010
Posts: 8,977
Wow! Feb 2012 inflation rate for KE checks in @16.7% down from 18.3%.

Now inflation is doing a USDKES reversal. Unbelievable?

http://af.reuters.com/ar...ws/idAFL5E8DT02620120229
$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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