August Inflation Rate To Top 8.8% – Cytonn

“We are projecting the y/y inflation rate for August 2022 to fall within the range of 8.4-8.8 percent, with a bias towards an increase from the 8.3 percent recorded in July,” said Cytonn Investments.

The inflation rate for the month of August will be pegged on:

High fuel prices – Fuel prices for the period 15th August 2022 to 14th September 2022 remained unchanged at 159.1 shillings per liter for Super Petrol, 140.0 shillings per liter for Diesel, and 127.9 shillings per liter for Kerosene.

“However, we note that this is the highest fuel prices have ever been in Kenya, and given that fuel is a major input to most sectors, we expect the high prices to weigh on the inflation basket in the short term.”

Increasing food prices – This was evidenced by the 15.3 percent y/y increase in the prices of food & non-alcoholic beverages as of July 2022 due to increased costs of production and erratic weather conditions.

“Given that the index constitutes 32.9 percent of the inflation basket, we expect the prevailing high food prices to exert pressure on the inflation rate.”

Lower Electricity Prices – The price of electricity was 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 percent in order to reduce the cost of living.

The reduction in electricity costs has continued to mitigate a steeper increase in the prices of goods given the lower production costs.

“Going forward, we expect the inflation rate to remain elevated on the back of high fuel and food prices as concerns remain high about the inflated import bill and widening trade deficit.

Should the supply chain constraints persist, we expect an even higher import bill, resulting from increased landed costs of fuel given that Kenya is a net importer.”

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