Kenya’s inflation has dropped to its lowest point in four years, easing to 4.3 per cent in July from 4.6 per cent in June, according to new data from the Kenya National Bureau of Statistics (KNBS).
The significant dip has been attributed to the shilling's robust performance, which has notably reduced transport costs and contributed to overall price stability.
Consumer prices in Kenya have experienced a month-on-month decrease of 0.2 per cent, a reversal from June’s 0.4 per cent rise. This recent decline in inflation is a stark contrast to the median forecast of 4.7 per cent projected by economists surveyed by the international outlet Bloomberg.
The easing inflation could influence the central bank’s decision on interest rates, with a potential rate cut expected when the Monetary Policy Committee convenes on August 6.
The central bank has previously raised the key interest rate by 600 basis points since May 2022, aiming to stabilise inflation around its 5 per cent target.
Among the key contributors to the lowered inflation rate is a substantial 21 per cent appreciation in the Kenyan shilling.
This has led to a notable reduction in transport costs, which saw a rise of just 4% in July, compared to a sharper 7.7 per cent increase the previous month. The slight decrease in gasoline prices by 0.53 per cent has further alleviated pressure on transportation expenses.
Food prices have remained relatively stable, with an annual increase of 5.6 per cent in July, matching the previous month’s rate. The availability of surplus maize, amounting to 31 million 50-kilogram bags, is expected to mitigate food inflation until the next major harvest in November, as reported by Paul Ronoh, Principal Secretary for Agriculture.
However, not all food categories saw a reprieve. Vegetables like cabbages, onions, and tomatoes have experienced sharp price increases, with cabbages soaring by 46.1 per cent, onions by 32.1 per cent, and tomatoes by 28.7 per cent year-on-year. Conversely, maize and wheat flour prices have dropped significantly compared to June 2023, with sifted maize flour falling by 35.8% and brown wheat flour by 9.8 per cent.
In the non-food sector, cooking gas has seen a 15.5 per cent price hike, reflecting ongoing cost pressures. Monthly house rents for one-bedroom apartments have risen slightly by 1.5 per cent. Despite these increases, overall inflation remains under control, bolstered by decreasing fuel prices.
The Kenyan government has set an inflation target range of 2.5 per cent to 7.5 per cent for the medium term. The central bank’s upcoming decision on interest rates will be keenly watched, as it could impact the broader economic landscape and the stability of the shilling.
The central bank has maintained its benchmark lending rate at 13.0 per cent since June, citing stable inflation within its target range and a focus on maintaining exchange rate stability.
