Inflation Rate For January Up To 5.7 Percent

The y/y inflation for the month of January 2021 increased to 5.7n percent from the 5.6 percent recorded in December 2020 according to stats released by the Kenya National Bureau of Statistics (KNBS).

There was a 1.3 percent increase in the Food and Non-Alcoholic Drinks Index, mainly contributed by the increase in prices of cooking oil (salad), white bread, and cabbages by  10.4, 6.6, and 3.4 percent, respectively, among other food items.

In Kenya, the inflation rate highly depends on the prices of food. Whenever there is an increase in food prices, the inflation rate also goes up. For the first time in a long time, there was an increase in the price of bread in Kenya as well as wheat flour.

At the same time, there was a 0.3 percent increase in the Housing, Water and Electricity, Gas and Other Fuels’ Index, mainly attributed to a 4.2 percent and 3.2 percent increase in the cost of kerosene and electricity, respectively.

There was also a 1.1 percent increase in the Transport Index, mainly driven by a 4.9 percent and 0.2 percent increase in pump prices of diesel and petrol, respectively.

The Covid-19 pandemic has hit hard on the finances of many Kenyans and any increase in basic commodities has always hurt them. Currently, the high and numerous taxes in places are also set to see an increase in the price of common products and services.

“Going forward, we expect the inflation rate to remain within the government’s set range of 2.5 – 7.5 percent despite the recent increases in fuel prices. Food prices are likely to remain low due to favorable rainfall received,” said Cytonn.

In 2020, the inflation remains well anchored, month-on-month overall inflation stood at 5.6 percent in December 2020 compared to 5.3% in November, and is expected to remain within the target range in the near term, supported by lower food prices and muted demand pressures with the recently introduced tax measures expected to have a modest impact on the overall inflation.