April Inflation Rate To Hit 6.2 Percent

“We are projecting the y/y inflation rate for April 2022 to fall within the range of 5.8-6.2 percent,” said Cytonn Investments in their latest report.

According to Cytonn, the inflation numbers will be pegged on the increasing fuel prices. Fuel prices for the period 15^th April 2022 to 14^th May 2022 increased by 7.3 percent to 144.6 shillings per liter for Super Petrol, 8.6 percent to 125.5 shillings per liter for Diesel, and 9.6 percent to 113.4 per liter for Kerosene.

With fuel being a major contributor to Kenya’s headline inflation, we expect the increasing fuel prices to continue to exert upward pressure on the inflation basket.

At the same time, increasing food prices will raise inflation. This was evidenced by the 9.9 percent y/y increase in the prices of food & non-alcoholic beverages as of March 2022 due to increased costs of production.

Food prices increased by 1.5 percent m/m from February 2022 mainly due to increases in the prices of cooking oil (salad), wheat flour, and kale among other food items. Further, adverse weather conditions in most parts of the country have pushed food prices upwards.

The price of electricity which reduced by 15.7 percent in January 2022 marking the first phase of compliance with President Uhuru Kenyatta’s directive to cut the cost of electricity by 30.0% in order to reduce the cost of living.

The reduction in electricity costs helped prices of goods remain stable during the month of March 2022 due to lower production costs. Additionally, a further 15.0 percent reduction in the cost of electricity is expected to be implemented once negotiations with Independent Power Producers (IPPs) are completed coupled with the Energy and Petroleum Regulatory Authority maintaining the Fuel Cost Charge at 4.3 shillings per kilowatt-hour from January 2022 will help mute energy inflationary pressures going forward.

“Going forward, we expect the inflation rate to remain within the government’s set range of 2.5 – 7.5 percent. However, concerns remain high about the inflated import bill and widening trade deficit as global fuel prices continue to rise due to supply bottlenecks worsened by the geopolitical tensions arising from the Russia-Ukraine invasion.

We expect increased inflationary pressure mainly due to the rising global fuel prices which are likely to deplete the fuel subsidy program currently in place. Further, the lower-than-expected rainfall being witnessed in the majority of the country is expected to continue driving food prices upwards which will, in turn, continue to exert upward pressure on the inflation basket.

Read More: Cooking Oil, Wheat, and LPG Price Surge Pushes March Inflation to 5.56%