Kenya’s inflation rate has hit a 14-month low as the cost of living eases due to moderating prices of basic food items. The Kenya National Bureau of Statistics (KNBS) reported that inflation rose at the slowest pace in nearly one and a half years in July, reaching 7.3 percent, down from 7.9 percent in June.
This significant drop in inflation is a positive sign for the country’s economy, marking the first time in 14 months that the rate has fallen back within the Central Bank of Kenya’s target range of between 2.5 and 7.5 percent. The decline in inflation comes despite the recent surge in fuel-induced transportation costs.
One of the primary factors contributing to the easing inflation is the moderation in the rise of average food prices. The KNBS data shows that the average price of food rose by 8.6 percent in July, down from 10.3 percent in June. During this period, prices of essential food items such as Irish potatoes, tomatoes, cowpeas, and cabbages experienced a substantial decrease, leading to the overall drop in inflation. However, the price of onions saw a notable increase of 11.4 percent during the same period.
The reduction in inflation is attributed to the end of a long rainfall season, which positively impacted food production and availability, leading to a decrease in food prices. Additionally, the prices of gas/Liquified Petroleum Gas (LPG) and electricity fell, contributing to the decline in the housing, water, electricity, gas, and other fuels index by 1.2 percent between June and July.
Kamau Thugge, the recently-appointed Governor of Kenya’s Central Bank, seems to be making progress with the country’s economic policies, as the inflation rate dropped for the second consecutive month. However, some challenges persist, such as the rising cost of kerosene and public transport, which could impact low-income citizens.
Overall, the drop in inflation and the moderation of essential commodity prices bode well for Kenya’s economic outlook. As the country continues to address fiscal challenges and economic recovery efforts, close monitoring of inflation trends remains crucial to ensure stable and sustainable growth.
By: Montel Kamau Serrari Financial Analyst 1st August, 2023
photo source Google
