Kenya inflation hits double digit

April 29, 2011

, NAIROBI, Kenya, Apr 29 – The country\’s year-on-year inflation raced into double-digit figures in April, hitting 12.05 percent up from the 9.19 percent recorded in March.

This marks the sixth consecutive time inflation has risen in the country from a low of 3.18 percent witnessed in October 2010. The rise is occasioned by a sharp increase in fuel and commodity prices in the country that has seen the cost of living go up.

The Kenya National Bureau of Statistics (KNBS) said the Consumer Price Index rose 3.2 percent in April from a March as the food and non-alcoholic drink index went up 4.76 percent.

The energy index went up 2.21 percent while transport costs went up 4.29 percent.

Joshua Anene, a trader with Commercial Bank of Africa said the rise would pressure the Central Bank into hiking interest rates to stabilise the situation.

"CBK has to tighten the monetary policy and at this point has to hike the interest rates," Mr Anene said, adding that the CBK\’s initial focus had been growth adding access to easy money was not the priority now.

"The CBK will have to compromise growth in the short term for stability by addressing the high inflation and a weakening shilling," he said.

In March, the Central Bank\’s Monetary Policy Committee raised its benchmark base lending rate to six percent from 5.75 percent.

Turmoil in the Middle-East has seen volatility in oil prices with pump prices in Nairobi reaching an all time high of Sh111.

The Kenyan government has, in the last two weeks, announced a raft of measures including waiving taxes and duties on fuel products and imported grains.

Alternatives available include borrowing from the domestic market, which is a road that is not very attractive to the Treasury and the Central Bank of Kenya, since it would mean pressuring the already volatile interest rates and inflationary pressures.

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