Rates: No Change Until H210

BMI View: The extent of the cut in Kenya's Central Bank Rate - by 75 basis points to 7.00% - on November 24 surprised most observers, given the widespread expectations that rates would remain on hold. We see no further movement in the policy rate in H110 in order to avoid stoking inflation which ticked up in the final month of 2009. Rather, we look towards the possibility of tightening in the second half of the year to 7.25% as global commodity prices continue to rise and the domestic economy recovery is consolidated, which will put pressure on domestic prices.

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