Kenyan inflation at four-year low opens room for rate cut
Kenyan annual inflation eased to an almost four-year low in June as the rise in food prices was more benign, providing some respite to consumers who have become increasingly frustrated by the high cost of living.
Consumer prices rose an annual 4.6% this month, Nairobi-based Kenya National Bureau of Statistics said Friday in an emailed statement. That matched the median estimate of three economists in a Bloomberg survey and was the lowest rate since September 2020. Prices rose 0.4% in the month.
The reading will be encouraging to monetary policymakers who have lifted the key interest rate by 600 basis points to 13% since May 2022 to bring inflation to the 5% midpoint of the central bank’s target range, where they prefer to anchor expectations. It may also pave the way for a rate cut when they meet in August.
The cost-of-living crisis has fanned unrest. Protests that started last week against a tax bill that protesters believed would onerously increase prices came to a head this week.
They led President William Ruto to scrap the bill on Wednesday after at least 23 people were killed in the demonstrations. The proposed taxes on everything from bread to motor vehicles to mobile money were aimed at improving state coffers and accessing more International Monetary Fund financing.
Other Insights:
- Prices of food and non-alcoholic drinks – which makes up a third of the inflation basket – rose 5.6% from 6.2% a month earlier.
- Food prices are expected to ease in the medium term helped by a government subsidy on fertilizer and seeds, Treasury Secretary Njuguna Ndung’u said in his budget speech on June 13
- Transport costs rose 7.7% in June from 8.1% a month earlier after gasoline prices were cut for a seventh straight month.
- Housing, water, electricity, gas and other fuel prices rose 3.1% from 4.4% in May.
