Inflation easing offers glimmer of hope on cost of living crisisFriday December 30 2022
Kenya’s inflation slowed for the second month in a row on easing food prices but remained above the central bank’s upper target of 7.5 percent, the statistics agency reported Friday.
Inflation — a measure of cost of living over the last 12 months— slowed to 9.1 percent in December from 9.5 percent a month earlier.
The drop in the last two months signals glimmers of easing in the cost of living crisis, which has hit the highest levels in nearly five and a half years on soaring food and energy prices.
Foodstuffs cost 13.8 percent more in December than a year ago, but this was a drop from 15.4 percent jump in November, data from the Kenya National Bureau of Statistics showed.
Read: Inflation hurts spending power of consumers
Some of the food items whose prices slowed in December compared with November were largely vegetables like cabbages and spinach, while beef and maize flour prices continued to rise.
On year-on-year basis, the data showed consumers paid 37.7 percent to Sh77.47 for a kilogramme of loose maize, a staple, in December while cooking oil cost 9.1 percent per litre to Sh330.96.
Food accounts for nearly a third of the shopping basket for Kenyan families, meaning it has the biggest impact on overall movement in prices.
The data, however, showed the price of diesel, largely used for transportation and running farm machines, has jumped the highest in the last year, costing an average of Sh162.91 per litre in December, a 46.1 percent climb.
That pushed the average cost of transportation in December to 13 percent compared with 12 months ago, partly after buses raised fares to protect their margins during Christmas festivities.
Read: Producer inflation hits highest points since 2019
The Energy and Petroleum Regulatory Authority (Epra) has since September been denying motorists using petrol a price drop as much as Sh10 per litre to cushion diesel prices, which have ripple effects in major sectors of the economy.
“The transport index increased 2.3 percent between November 2022 and December 2022 mainly due to increase in prices of country bus fares. Notable though the prices of diesel and petrol remained the same in December 2022, they were high relative to December 2021,” KNBS said in the statement.
“The housing, water, electricity and other fuels’ index increased 0.7 percent between November 2022 and December 2022. This was mainly due to increase in 50 kilowatts electricity units and 200 kilowatts electricity units by 8.2 and 6.2 percent, respectively. ”
President William Ruto, who took power in September on a platform of easing the cost of living for the majority of poor households, has ruled out short-term price cushions, dropping subsidies on maize flour and fuel.
Dr Ruto has instead opted to cushion farmers against the high cost of fertiliser, releasing 1.3 million 50kg bags of the key input for Sh3,500 per bag during the short rainfall season [October-December] compared with average Sh6,500 previously.
“The false comfort of a financial bandage must come to an end because we are risking short-term comfort in place of sustainability in the long-term,” the President emphasised in October.
The Central Bank of Kenya, primarily tasked with stabilising prices, has since May raised the benchmark interest rate by 175 basis points to 8.75 percent, signalling lenders to raise the cost of borrowing.
Read: Inflation slows for the first time in 9 months amid CBK rate hikes
Increasing the key policy lending rate makes borrowing more expensive, and this is expected to reduce spending by businesses and families with the ultimate goal of lowering the prices of goods and services that have plagued the economy this year.
Inflation has since June breached the upper limit target of 7.5 percent, prompting the CBK to raise interest rates.