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Kenyan Inflation Rate Climbs to 2.8% on Increased Food Costs

By David Herbling
A vendor wearing a protective face mask carries a bunch of bananas to sell at his stall at Toi market in Nairobi, Kenya, on Tuesday, May 26, 2020. Kenya plans to spend 53.7 billion shillings ($503 million) on a stimulus package to support businesses that have been hit by the coronavirus pandemic, according to the National Treasury. (Patrick Meinhardt/Bloomberg)

(Bloomberg) -- Kenyan inflation accelerated in November, advancing for the first time since August after the prices of some food items increased.

Consumer prices rose an annual 2.8% this month, compared with a 2.7% increase in October, the Nairobi-based Kenya National Bureau of Statistics said on Friday in an emailed statement. Prices rose 0.3% in the month.

The inflation reading comes ahead of a meeting next week by the central bank’s monetary policy committee. It is scheduled to announce the latest interest-rate decision on Dec. 5.

Inflation remains at the lower end of the 2.5% to 7.5% target range that central bank Governor Kamau Thugge prefers to anchor price-growth expectations.

Prices of food and non-alcoholic drinks – which make up a third of the inflation basket – grew 4.5% at an annual rate on higher prices of vegetables including cabbages, carrots and potatoes. 

The transport index decreased 1.1% after the government left gasoline prices unchanged during the mid-month review, while the housing, water, electricity, gas and other fuels index increased 0.1% due to a sharp rise in the price for international flights.

Key Insights:

  • Ongoing corn harvests in breadbasket regions could lead to Kenya’s first surplus of the staple in a decade, according to the presidency. That should help keep corn prices stable.
  • Plans to reintroduce a raft of controversial taxes scrapped earlier this year after deadly protests may stoke price growth.
  • A proposal on value added tax on fertilizer and pest control products “could lead to higher costs for manufacturers, which may, in turn, result in increased prices for farmers,” according to a research note by KPMG. The changes may undermine the country’s food security by making essential agricultural inputs more expensive, it said.
  • A planned increase for levies on telecommunication services may impact communication costs. Mobile phone airtime is the single biggest expenditure item in Kenya’s inflation basket with an overall weight of 5.5%. Overall, information and communication accounts for 7.78% of the price index.
  • The world’s best performing currency this year has helped slash import costs of raw materials and finished goods, including fuel. The shilling has strengthened by around 20% against the dollar since the end of 2023.

(Updates with details from 5th paragraph)

©2024 Bloomberg L.P.