The Insight of Inflation and Consumer Price Indices in Kenya

Inflation is a sustained increase in the general level in prices for goods and services and it is often measured as an annual percentage increase. During the period of inflation, the value of the dollar, mostly the tool used to measure the flexibility of inflation in the country, does not stay constant and it is usually observed in terms of the purchasing power, which is the real tangible goods that money can buy.

When the rate of inflation rises, there is usually a decline in the purchasing power of money. This is according to Investopia though there is another school of thought that talks of inflation as an effect caused by an increase in the available currency and credit beyond the proportion available of goods and services.

Increase in inflation in Kenya is usually based of the change of the prices of goods especially the basic goods like foodstuffs. During the year-on-year Consumer Prices in the country increased by 6.72 percent during the month of October 2015 and this follows a growth of 5.97 percent in the previous month of September 2015 and this was as a result of the prices of food, housing, rent as well as the energy rose and, therefore, in the process pushing the inflation up.

During the month of October, the prices of food and that of the non-alcoholic beverages increased by 11.27 percent while the prices of the housing as well as utilities increased by 3.96 percent.

The inflation in Kenya averaged at 10.68 percent from the year 2005 to the year 2015 with an all-time high of 31.50 percent in the month of May of the year 2008 and also reached a record low of 3.18 percent in the month of October of the year 2010 according to Kenya Bureau of Statistics.

During the calculation of Consumer Price Indices, the category that contains food as well as non-alcoholic beverages is often the most important category.

The table below shows weight taken by different categories in terms of percentages of the total weight;

From the table above, the category of food and non-alcoholic beverages shows how important the category is.

The table below shows the trend of inflation for the past three months this year as well as showing the future predictions;