Kenya’s annual headline inflation jumps to 8.29% in September

By bne IntelliNews October 1, 2013

Kenya’s annual inflation rate moved higher for the fourth month in a row in September, rising to 8.29% from 6.67% in August mainly due to higher food prices, data by the Kenya National Bureau of Statistics showed.

The prices of food and non alcoholic beverages, which are the main inflation driver with a 36.04% weight in the consumer basket, rose 12.55% y/y last month, speeding from a 9.74% y/y growth in August. The main reasons for the rise in the food index are the implementation of a new VAT (value added tax) law that increased the number of goods and services subjected to VAT and seasonal factors affecting supply of common food crops, the bureau said.

The prices of housing, water, electricity, gas and other fuels, which account for 18.3% of the total consumer price index (CPI), rose 5.13% y/y, accelerating from a 4.58% annual growth in August, driven up mainly by higher prices of cooking gas, kerosene and other cooking fuels. Transport prices, which have an 8.66% weight, grew 6.95% y/y, up from a 6.66% y/y rise in the previous month, mainly due to hikes in public transport fares that were attributed to higher prices of petrol and diesel.

Kenya’s monthly headline inflation rate shot up to 1.8% in August from 0.3% in the previous month, with food prices growing 2.87% (+0.1% in August), housing, water, electricity, gas and other fuels prices rising 0.87% (+0.99% in August) and transport process climbing 0.77% (+0.84% in August).

The further acceleration of the annual inflation rate suggests that the Central Bank of Kenya might choose to tighten its monetary stance and hike its benchmark lending rate, which has been kept unchanged at 8.5% since May. The bank’s monetary policy committee will hold its next rate setting meeting at the beginning of November.

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