Kenya’s inflation passes 15pc in July

August 1, 2011
Kenyan Sh10 and Sh20 coins/File

, NAIROBI, Kenya Aug 1 – Kenya’s inflation figures continued climbing in July adding 1.04 points to 15.53 percent from the 14.49 percent recorded in June driven by higher food prices.

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 July.

Consumer Price Indices (CPI) for food and transport account for the largest increase at 24 percent and 23 percent respectively.

This marks the ninth 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.

According to KNBS data, the food and non-Alcoholic drinks’ index went up by 1.71 percent between June and July 2011. This was attributed to cost increases recorded in respect of maize flour, maize grain, sugar and rice.

The average price of a two-kilogram packet of sifted maize flour, for instance, continued to increase from Sh130 in June to Sh136 in July 2011. Sugar prices likewise, surprisingly surged upwards by 19.43 percent from an average of Sh102.95 per kilogram recorded in June to Sh122.38 in July 2011.

However, between the two months, there were notable falls in the prices of potatoes, onions, sukuma wiki, cabbages and carrots by 4.03, 6.62, 1.16, 1.34 and 2.40 percent, respectively.

The CBK has been on a quest to reign in inflation raising its base lending rate to 6.25 percent.

“The committee observed that the tight monetary policy stance would not achieve the desired results at the moment if the supply sides of food, fuel and energy were not effectively being managed to signal relief to the constraints guiding inflationary expectations,” a statement from the CBK’s monetary policy committee read.

However, its decision to leave the rate unchanged during its last MPC meeting has baffled many analysts questioning the Central Bank’s intent to lower inflation. They expected the CBK to increase the rate modestly to send a signal to financial markets about its tightening credentials.

Analysts at PineBridge Investments expect inflation levels to touch 20 percent by the end of the year eroding the purchasing power of money and thus push more people into poverty.

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