Surging Grain Prices Keep Kenyan Inflation at Five-Year High

Kenyan inflation accelerated for a sixth successive month in August as price pressures from a prolonged drought persist and a slump in the shilling raised the cost of imported goods.  

Consumer prices rose 8.5% from a year earlier, compared with 8.3% in July, the Kenya National Bureau of Statistics said in an emailed statement Wednesday. That matched the median of four economists’ estimates in a Bloomberg survey.

Inflation remained above the Central Bank of Kenya’s 7.5% ceiling since June, and is at levels last seen in 2017 when a severe drought drove up the cost of food. 

Annual food and non-alcoholic drinks price-growth, which accounts for a third of the inflation basket, quickened to 15.3% in August, the same as the previous month -- driven by the cost of corn flour and grains. The Furnishing and Household Maintenance Index rose 10.3% from 9.8% in July, while transport prices climbed 7.6% from 7% even as authorities left fuel prices unchanged in the capital Nairobi for the month beginning Aug. 15. Prices rose 0.4% in the month.

A drop in the cost of global commodities such as wheat, cereals and edible oils to where they were before Russia’s invasion of Ukraine may ease domestic inflation and offset the impact of the nation’s drought and a reduced corn harvest on food prices. Still, the central bank may be persuaded to raise the benchmark interest rate on Sept. 29 if a slump in the shilling persists.

Since the monetary policy committee unexpectedly held borrowing costs at 7.5% last month, the shilling has depreciated by 1.1% against the greenback to trade at a record low of 120.12 per dollar, amid uncertainty over the Aug. 9 elections and expectations of more rapid rate hikes in the US.

Source: Bloomberg