A fruit vendor in Nakuru town. Increases in prices of foodstuff, fuel and housing have raised the inflation rate to 4.45 per cent in February. Photo/Suleiman Mbatiah
What you need to know:
KNBS data released Thursday showed that increases in food, fuel and housing costs raised the inflation rate to 4.45 per cent in February.
Kenya’s inflation rate had been on a downward trend for over a year from a high of 19.72 per cent.
The prices of goods and services edged up for the second month in a row in February, diminishing chances that the banking sector regulator will lower the cost of loans in this month’s monetary policy meeting.
Kenya National Bureau of Statistics data released Thursday showed that increases in food, fuel and housing costs raised the inflation rate to 4.45 per cent in February from 3.67 per cent in January.
“Between January and February 2013, food and non alcoholic drinks’ index increased by 1.29 per cent. Housing, Water, Electricity, Gas and Other fuels’ index went up by 0.39 per cent. This increase is attributable to higher costs of house rents, kerosene and other cooking fuels which outweighed observed lower costs of Electricity,” said KNBS.
Upward movement of food prices was largely attributable to higher milk and meat prices. The price of a half litre milk pouch has gone up by Sh10 since the turn of the year with processors attributing it to low deliveries from farmers.
Transport index went up by 0.58 per cent over the same period due to higher costs of petrol, diesel, taxi, and matatu fares.
Kenya Power has already announced plans to review it electricity tariffs, which is likely to fan inflation given that its cluster has the second largest weight index in the inflation basket at 18.3 per cent.
Kenya’s inflation rate had been on a downward trend for over a year from a high of 19.72 per cent following monetary policy measures taken by the government which included raising interest rates and cutting government spending.
But from June last year the Central Bank started easing the monetary policy so as to stimulate economic growth, which had lost momentum during the high interest rate period.
The inflation rate had been on a downward trend for thirteen months till last month despite the monetary policy committee reducing the indicative Central Bank Rate (CBR) in successive sittings to 9.50 per cent in January from 18 per cent in June.
The committee meets mid this month for the first time since the inflation rates reversed. Analysts expect the regulator to hold the benchmark rate.
“It is still below the target of five per cent which is allowed to go plus two to seven per cent before they react,” said John Randa former member of the MPC.
The Central Bank has been tightening the cash in circulation by mopping up liquidity in open market operations which have seen the rate at which banks borrow from each other, increase to an average of 9.92 per cent last week from 6.66 per cent at the beginning of the month.
