Kenya’s headline inflation quickens to 8.4% y/y in August on rising food prices

By bne IntelliNews September 2, 2014

Kenya’s annual inflation rate accelerated for the fifth straight month in August, rising to 8.36% from 7.67% a month earlier and drifting further away from the government's medium-term target of 5% plus or minus 2.5pps, data by the Kenya National Bureau of Statistics (KNBS) 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 10.85% y/y in August, quickening from a 9.06% y/y growth in July.

On the other hand, the prices of housing, water, electricity, gas and other fuels, which account for 18.3% of the total consumer price index (CPI), rose 6.98% y/y, decelerating from a 7.7% y/y growth in July.

Transport prices, which have an 8.66% weight, grew 11.68% y/y, down from an 11.8% y/y rise in the previous month.

Kenya’s monthly headline inflation rate, quickened to 0.94% last month from 0.46% in July, with food prices climbing 1.75% (+0.5% in July), housing, water, electricity, gas and other fuels prices rising 0.32% (+0.57% in July) and transport costs increasing 0.73% (+0.35% in July).

At its latest monetary policy meeting, held on July 8, Kenya’s central bank left its benchmark rate unchanged at 8.5% in order to continue anchoring inflationary expectations and sustain price stability. The next monetary policy meeting is scheduled for Wednesday (Sept 3) and it will be interesting to see whether the rising inflation will trigger a rate hike.

y/y inflation rate Aug-14 Jul-14 Aug-13 weight
All items 8.36% 7.67% 6.67%        100    
Food and non-alcoholic beverages 10.85% 9.06% 9.74% 36.04
Alcoholic beverages, tobacco and narcotics 4.44% 5.07% 6.10% 2.06
Clothing and footwear  4.95% 4.94% 4.79% 7.43
Housing, water, electricity, gas and other fuels  6.98% 7.70% 4.58% 18.3
Furnishings, household equipment and routine household maintenance 5.44% 5.52% 3.62% 6.16
Health  6.37% 6.73% 4.33% 3.13
Transport  11.68% 11.80% 6.66% 8.66
Communication  0.67% -2.86% -3.62% 3.82
Recreation and culture  12.73% 12.51% 3.87% 2.25
Education  5.44% 5.60% 4.83% 3.14
Restaurant and hotels 6.86% 7.49% 6.98% 4.48
Miscellaneous goods and services 4.45% 4.58% 4.47% 4.52
Source: Kenya National Bureau of Statistics        

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