February Inflation Rate To Fall Within 8.6% And 9.0%

Analysts have projected that the y/y inflation rate for February 2023 will ease to a range of 8.6 -9.0 percent.

The easing of the inflation rate will be pegged on the:

Transmission of the Impact of the Tightened Monetary Policy – The Monetary Policy Committee has maintained a tightened monetary policy, maintaining the MPC rate at 8.75 percent in January 2023, which followed the 50.0 bps to 8.75 percent in November 2022, from 8.25 percent in September 2022.

Key to note is the impact the tightened Monetary Policy Committee Central Bank rate is still transmitting in the economy, evidenced by the slight reduction in inflation to 9.0 percent in January 2023 from 9.1 percent in December 2022 and is expected to continue anchoring the inflation rate towards the CBK’s target range of 2.5 – 7.5 percent.

Maintained Fuel Prices-For the third consecutive time, The Energy and Petroleum Regulatory Authority (EPRA) maintained the fuel prices for the period between 15^th February 2023 to 14^th March 2023, at Kshs 177.3, Kshs 162.0 and Kshs 145.9 per liter of Super Petrol, Diesel and Kerosene, respectively.

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Kenya’s inflation has been easing over the last four months coming in at 9.0 percent in January 2023 from a peak of 9.6 percent in October 2022 pointing towards a gradual easing, in tandem with the cooling down of global inflation.

Further, the easing is attributable to the impact of the tightened monetary policy with the MPC increasing the rate to 8.75 percent in November 2022 and maintaining the same in January 2023.

As such, the impact of the further tightening in November 2022 is still transmitting in the economy and will continue to anchor the elevated inflation towards the Central Bank’s target range of 2.5-7.5 percent.

Going forward, we expect inflation to remain elevated in the short term but to continue easing at a gradual rate because of the high fuel and food prices.

Notably, the government’s plan to do away with the subsidies as part of austerity measures, the erratic weather conditions in the country, and high electricity prices will continue to increase the cost of living consequently slowing down the rate of inflation easing.

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