Inflation Rate for June Projected to Hit 6.2 percent

The Year on Year (Y/Y) inflation rate for the month of June is being projected to come in within the range of 5.8 percent – 6.2 percent, according to analysts from Cytonn Investments.

This is in comparison to an inflation rate of 5.49 percent which was recorded in May.

The Y/Y inflation for the month of June is expected to rise due to the base effect (inflation in the corresponding period of the previous year) as well as a rise in the transport index, which has a weight of 8.7 percent.

This is because petrol prices increased by 2.7 percent to 115.1 shillings from 112 shillings per liter previously, while diesel recorded a 0.4 percent rise to 104.8 shillings from 104.4 shillings per liter previously.

M/M inflation is, however, expected to decline, with the rise in the transport index being mitigated by a decline in the food and non-alcoholic beverages index, which has a weighting of 36 percent.

This will mainly be driven by a decline in food prices such as tomatoes and maize flour, following the release of 2 million bags of maize from the strategic food reserves the previous month at a subsidized cost of 2,300 shillings per 90 kg bag against 3,200 shillings in the open market, thus easing the grain shortage and hence curbing rising flour prices.

Moreover, Cytonn Investments expect a decline in the housing, water, electricity, gas and other fuels index following the 0.3 percent decline in kerosene prices to 104.3 shillings, from 104.6 shillings per litre previously.

Going forward, food inflation will be subdued, following the directive to open the duty-free import window for maize from July to plug the grain shortage, which will allow traders to import up to 12 million bags.

Read Also: Inflation Rate for May Eases to 5.49 Percent