Inflation falls to 10-month low of 7.9 percent

Kenya’s cost of living measure fell in April to its lowest level in 10 months as growth in food prices moderated after the onset of prolonged rains, which boosted production of selected vegetables.

The Kenya National Bureau of Statistics (KNBS) reported on Friday that inflation – a measure of the cost of living over the past 12 months – fell to 7.9 percent from 9.2 percent in March.

Household budgets for food grew at a slower rate of 10.1 percent year-on-year in April compared with 13.4 percent in the previous month, KNBS data shows.

The growth in inflation is the slowest since June 2022, when it was at the same level.

However, families suffered from higher costs for electricity, housing, cooking gas and other fuels, with prices rising 9.6 percent on average year over year compared to March’s rise of 7.5 percent.

The index of housing, water, electricity, gas and other fuels rose 2.7 percent between March 2023 and April 2023. This was mainly due to higher electricity prices, which rose 18.7 percent for 50 kilowatts and 13.7 percent for 200 kilowatts, KNBS said.

Food usually has the greatest impact on the overall movement of prices because it accounts for nearly a third of the shopping basket of Kenyan families.

The data shows that the growth in average food prices was the slowest since March 2022, at 9.9 percent.

Prices of (Irish) potatoes, beans and mangoes increased by 7.2, 5.0 and 3.5 percent, respectively, between March and April 2023.

During the same period, spinach prices, Pay the week (turnip) and tomato by 12.6, 11.8 and 4.7 percent, respectively.

The increase in the average transportation cost in April also eased year-on-year to 9.8 percent in April from 12.6 percent in the previous month, while it rose by 0.2 percent month-on-month.

President William Ruto, who came to power in September in part on a campaign platform to ease the cost of living for the majority of poor families, has ruled out short-term reforms, removing subsidies on Unga and supercharged gasoline.

Still, the Roto administration has denied consumers of premium gasoline a price drop since October, cash it has used ever since to prop up diesel purchases while keeping the cushion on kerosene.

However, inflation remained above the higher target of 7.5 percent.

is reading: Economists argue that inflation remains above the country’s target

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The current high inflationary pressures amid persistent erratic and below-average rainfall during the main cropping season from March to April and May prompted the Roto administration to impose duty-free imports of maize, rice, cooking oil, sugar, wheat and beans.

In 2023, inflation is expected to average at a similar pace as last year, supported by a weaker shilling. Currency volatility and swings in food prices in response to changing weather patterns remain major risks, analysts at Barcelona-based FocusEconomics wrote in a consensus report late Tuesday.

Analysts at British-owned HSBC, Europe’s largest bank by asset value, have the highest inflation forecast for Kenya for 2023 at 9.1 per cent, followed by Standard Chartered of London (9.0 per cent), Fitch Ratings (8.0 per cent) and the market intelligence and consultancy firm. , FrontierView (8.0 percent).

However, US Moody’s Analytics (6.5 percent), Switzerland-based Julius Baer (6.7 percent), The Economist Intelligence Unit (6.9 percent), Nigeria’s Vitiva (7.0 percent), Euromonitor International (7.0 percent) and Goldman Sachs (7.3 percent). cent), see inflation falling below the upper target.

Other companies followed by FocusEconomics are JPMorgan (7.5%), Fitch Solutions (7.5%), Capital Economics (7.7%), Oxford Economics (7.8%) and brokerage house Citigroup Global Markets (7.8%).

The depreciation of the shilling exacerbates the ongoing cost-of-living crisis in a net-import economy, driving up commodity prices as merchants and factories pass on additional overheads to the consumer.

The resulting price hike erodes consumers’ purchasing power, reducing demand for goods and hurting job creation.

The shilling, for example, has lost about 10 percent of its value against the globally bullish US dollar since the start of the year, adding pressure to inflation.

The Monetary Policy Committee of the Central Bank of Kuwait in late March raised the benchmark lending rate to 9.50 percent from 8.75 percent to curb inflation.

is reading: The average lending rate exceeds 13% for the first time since 2018

An increase in the prime lending rate makes borrowing more expensive, and this is expected to reduce or defer spending on luxury goods such as cars, thus helping to curb rising inflationary pressures.

The Economist Intelligence Unit (EIU) analysts were quoted by the Economist Intelligence Unit (EIU) as saying: “The rate hike to 9.50 percent means the real rate is now positive for the first time since May 2022, although the shilling will remain weak given the persistent shortage of foreign exchange.” a report. “We expect monetary policy tightening and new foreign exchange inflows to help moderate price growth and support the shilling in the second quarter of 2023.”

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