Kenya’s inflation continues to ease

January 31, 2012
Vegetables in the market/FILE

, NAIROBI, Kenya, Jan 3 – Inflation continues to ease as widely expected with the January figures showing a slight decline to 18.31 percent.

According to data released by the Kenya National Bureau of Statistics, the cost of most food items such as sugar, maize flour, rice and green maize edged lower – albeit marginally – but contributed to the 0.62 percent dip in the overall month-on-month inflation.

The drop was however outweighed by rises in other food commodities such as tomatoes, potatoes and cabbages. This led to the slight increase in the Food and Non Alcoholic Index, which is a major component in the Consumer Price Indices (CPI) basket.

“This slight increase (in the CPI) was a net effect of both rises and falls in the prices of a number of food products. For instance, the prices of tomatoes, sukuma wiki, potatoes and onions went up by 14.97 percent, 13.31 percent, 12.43 percent and 14.19 percent respectively,” a statement from KNBS read.

As a reflection of the reduced fuel prices and appreciation of the foreign exchange rate, the Transport Index went down by 1.47 percent in the period under review as did the communication index following a cut in mobile phone handset prices.

This marks the second consecutive month that inflationary pressures are easing; providing relief for Kenyans who have had to grapple with a high cost of living.

Inflation has been edging upwards since November 2010 when it rose to 3.8 percent and continued to accelerate to 19.72 percent in November 2011, which many experts believe was the peak.

In December 2011, the cost of living slowed to 18.93 to reflect favourable weather conditions and a stringent monetary policy stance.

The tightening has helped cool off both the volatility in the exchange rate and the inflationary pressures leading analysts to believe that this deceleration trend will continue.

Equity Bank Chief Executive Officer James Mwangi predicts that the reversal in the CPI could result in single digit rates in the next few months.

Mwangi says the short term outlook for inflation is positive particularly because together with the exchange rate, the two indicators have responded well to the tight measures by the CBK.

This could also be boosted by the lowering of interest rates which is also expected to start edging lower once the CBK’s Monetary Policy Committee begin to ease the stance.

In its meeting in January, the committee held the indicative base rate constant at 18 percent and there is likelihood that the rate will be held steady or slashed slightly when the team meets on Wednesday to give the authorities enough time to review the impact of the Central Bank Rate hikes.

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