Kenya Inflation Slows as Food-Price Growth Cools

Kenyan inflation slowed to the lowest level in a year in September as food-price growth cooled further.

The annual inflation rate dropped to 4.2% from 4.4% in August, the Kenya National Bureau of Statistics said Wednesday in an emailed statement. The median of three economists’ estimates in a Bloomberg survey was 4.7%. Prices were unchanged in the month.

Key Insights:

  • The prices of food and non-alcoholic drinks, which make up one-third of the inflation basket, increased 5.2% from a year earlier, compared with 5.4% in August. That was due to good rains that boosted supply, while demand was muted by reduced economic activity and measures to contain Covid-19.
  • Inflation has remained within the central bank’s target of 2.5% to 7.5% for three years. Prices are expected to stay within that band in the near term, Governor Patrick Njoroge said Tuesday in a statement that announced the decision to keep the benchmark interest rate at 7%.
  • Annual transport inflation slowed to 13% from 13.1%. Gasoline prices increased by 1.4% at the Sept. 14 review and diesel and kerosene prices declined. Fuel is a major component in production and transportation and affects the cost of goods. Diesel that is used in thermal power generation has an effect on electricity tariffs.
  • The biggest risks to inflation could come from fuel prices, new swarms of desert locusts that destroyed crops early this year, below-average rainfall and the ongoing health crisis, according to the country’s Parliamentary Budget Office.

— With assistance by Simbarashe Gumbo, and Hilton Shone

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