Inflation rate rises to 3.3 percent in January

A trader arranges groceries at the Nyeri market. Inflation rose to 3.3 percent in January 2025.

Photo credit: File | Nation Media Group

Consumer prices increased by 3.3 percent in January as the national statistician for the first time separated the price changes of volatile items —food, fuel transport— from the rest of the items in the cost of living basket. 

The 3.3 percent headline inflation —or the increase in all consumer prices over 12 months— was higher than the 3.0 percent the national statistician recorded in December, data from the Kenya National Bureau of Statistics (KNBS) shows.

Inflation is calculated using the consumer price index (CPI), or the cost of living index, which has a fixed basket of goods and services. Core inflation, where prices of food, fuel and transport are excluded, was two percent compared to 2.2 percent in December 2024.

Non-core inflation, which includes food and fuel, was 7.1 percent, up from 5.2 percent.  

Consumer prices in the economy continued trending upward after touching a 17-year low of 2.7 percent in October last year.

“The year-on-year headline inflation, as measured by the Consumer Price Index (CPI), stood at 3.3 percent in January 2025,” said Macdonald Obudho, the KNBS director-general.

“This indicates that the overall price level in January 2025 was 3.3 percent higher than in January 2024,” added Mr Obudho.

Food inflation, which takes up huge space in the CPI, or a fixed basket of goods and services, rose by 6.1 percent, while the fuel one went up by 0.7 percent over the same period.

While households reduced their spending on transport, they spent more on school fees with parents with children in private primary schools paying Sh30,935, an increase of 2.8 percent from Sh30,106.14 in December.

Core inflation —which does not include prices of food, fuel, and transport— by two percent while non-core rose by 7.1 percent in the latest numbers from the KNBS.

Although consumer prices have begun to rise, they remain within the Central Bank of Kenya (CBK) range of 2.5 to 7.5 percent, largely due to lower food and fuel prices.

After tightening its monetary policy to address the high consumer prices, which pushed up interest rates, the CBK has been loosening its policy by cutting its benchmark lending rates to inject cheaper money into the economy.

After a lag, commercial banks made the first cut on lending rates since the CBK started slashing the benchmark rate in August last year, yielding to pressure from the banking regulator.

CBK data shows that average lending rates fell to 16.89 percent in December from an eight-year high of 17.22 percent recorded in November.

Higher borrowing costs have hit the economy hard, with several reputable forecasters, including the National Treasury, forced to revise downwards their 2024 economic growth projections due to poor credit extension to the private sector.

Demand for credit fell by 1.1 percent in November compared with an increase of 3.7 percent in July —a 22-year low.

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