Kenya inflation hits 12.95 pc in May

May 31, 2011

, NAIROBI, Kenya, May 31 – Kenya’s inflation figures continued climbing in May, adding 0.9 points to 12.95 percent from the 12.05 percent recorded in April.

Reports from the Kenya National Bureau of Statistics (KNBS) show that high fuel and food prices maintained pressure on the Consumer Price Indices (the measure used to determine the level of inflation) in May.

This marks the seventh consecutive time inflation has risen in the country from a low of 3.18 percent witnessed in October 2010. The figure is also higher than the Central Bank’s target of retaining inflation at five percent.

KNBS statistics showed that the consumer price index stood at 1.01 percent in May, which was lower than April’s 3.03 levels. The food and non-alcoholic drink index went up 1.27 percent.

The energy index went up 0.91 percent while transport costs went up 2.38 percent.

Rising fuel and food costs have been the major drivers of inflation as poor rains have persisted during the year.

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. Mr Anene however said that the CBK was likely to hold its key lending rate at current six percent.

“The current inflation is not demand driven but more of supply constraints. I expect the CBK to hold at six percent to gauge and assess the impact of their last hike,” Mr Anene said.

He said that further hikes of the CBR rate would lead to a situation where credit would then become more expensive for Kenyans.

“If they hike it again then the next day banks will be advertising that the interest rates have gone up,” he said.

The CBK’s Monetary Policy Committee was to meet on Tuesday, where they will deliberate on the current situation and what actions to take.

On May 10, Standard Bank Head of African Research Stephen Bailey-Smith said that the Central Bank was under immense pressure to correct the rising cost of living in the country, adding that tightening monetary policy was inevitable. 

“After a few years of sustained, inflation seems to be quickly picking up. If the Central Bank does not step in then inflation could go as high as 18 percent this year,” Mr Bailey-Smith said.

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