Kenya’s inflation rate rose to 3.5% in February, driven by increasing food prices, making it the highest in five months. Core inflation remains at 2%, signaling subdued demand. The central bank may reduce interest rates to support growth, despite risks from recent tax measures. Food prices increased by 6.4%, while transport costs remained stable amid global fuel price drops.
Kenya’s annual inflation rate reached its highest level in five months as of February, driven primarily by a rise in food prices. The Kenya National Bureau of Statistics reported a 3.5% increase in consumer prices for February, up from 3.3% in January, aligning with predictions made by the central bank. Core inflation, which excludes the volatile food and energy sectors, remained steady at 2%, indicating weak consumer demand.
The inflation rate has consistently stayed below the central bank’s target midpoint of 5% since June, suggesting stability in the near term. This economic environment, along with a steady exchange rate, may encourage the Monetary Policy Committee (MPC) to consider lowering interest rates again in the upcoming April meeting. The MPC has already reduced the benchmark interest rate by 2.25 percentage points since August, now set at 10.75%, to support economic growth and extend private lending.
In February, food and non-alcoholic drink prices, which constitute a significant portion of the inflation calculation, rose by 6.4%, an increase from 6.1% the previous month. Transport costs held steady, with a rise of 0.7%. The unchanged gasoline prices during the mid-month review have also contributed to this stability, while the decline in global fuel prices is expected to help reduce energy costs for Kenya, which relies on imported refined petroleum products.
In summary, Kenya is experiencing an uptick in inflation largely due to rising food prices, reaching 3.5% this February. The core inflation rate remains stable at 2%. Given the current economic conditions and slight expectations for further interest rate reductions, attention will be focused on how tax measures implemented in December might impact inflation moving forward.
Original Source: financialpost.com
