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African Development Bank Policy Dialogue on Inflation in the East African Region

1. Inflation has mainly been driven by Food and Fuel Price Increases that account for 68 percent in the CPI Basket. 2. Overall inflation has been declining since December 2011 reflecting the impact of the tight monetary policy stance and falling food and fuel prices supported by the appreciation in

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African Development Bank Policy Dialogue on Inflation in the East African Region

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    1. African Development Bank Policy Dialogue on Inflation in the East African Region

    2. 1. Inflation has mainly been driven by Food and Fuel Price Increases that account for 68 percent in the CPI Basket 2

    3. 2. The Exchange Rate Responded to Currency Wars 3

    4. 3. Developments in the Euro Zone Affecting Exchange Rates in the Region International developments have affected exchange rates in the region. The collapse of commodity prices has not spared the South African Rand either. Other currencies have depreciated: Rand 34%, Uganda Shilling 34%, Kenya Shilling 19%, Tanzania Shilling 13% (Tanzania has capital controls in its balance of payments) 4

    5. 4. Exports Financing Less of Imports: Exchange Rate has to Weaken 5

    6. 5. Velocity of Money in Kenya has been Declining, An Indication of Financial Depth 6

    7. 6. The Money Multiplier has been Rising, An Indication of Financial Innovation 7

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