Inflation rise to 7-month high signals interest rates hike

What you need to know:

Inflation stood at 7.39 per cent in June, up from 7.30 per cent the previous month — making it the fourth increase in a row.

Inflation rose to a seven-month high in June to 7.39 per cent, raising the prospect of interest rates increase next Tuesday.

The cost of living measure, which rose for the fourth month in a row, crept up from 7.30 per cent in May on rising food, electricity and transport expenses.

The Kenya National Bureau of Statistics says electricity prices and food items like tomatoes, potatoes as well as Kenya’s staple, maize, have increased by double digits over the past year.

Analysts including Razia Khan, head of Africa research at Standard Chartered Bank, have maintained that the continued jump in inflation could see the Central Bank increase rates to control the cost of living measure.

Kenya has left its key lending rate at 8.5 per cent since May last year. The Central Bank’s monetary policy committee is scheduled to meet next week to set interest rates.

At 7.39 per cent for the year to June, the inflation rate is just below the upper limit of the CBK’s target of 7.5 per cent. Officials have set at five per cent with a margin of 2.5 per cent on either side.