Kenya’s Annual Inflation Rate to Accelerate Further in March

Kenya’s annual inflation rate in March would accelerate further on the back of higher oil prices according to Market Analysts, but the Central Bank maintains it is well anchored.

NCBA Market Research projects that inflation could hit 6.20% in March from 5.80% a month before.

“However, weak demand should limit the risk of target overshoots. Demand could soften further as new restrictions cool consumer spending,” they note in their Weekly Fixed Income Report dated 26 March 2020.

Cytonn Investments similarly expects an increase in the transport and fuel index which carries a weighting of 8.7% in the total consumer price index (CPI) as a result of the increase in fuel prices.

Consequently, the central bank maintains inflation is well anchored anxzd projected to remain within the government’s target range of 2.5%-7.5%.

“The inflation rate is expected to remain within the target range in the near term, supported by lower food prices and muted demand pressures. The recent increase in fuel prices is expected to have a moderate impact on overall inflation,” Dr Patrick Njoroge said Monday when the Monetary Policy Committee (MPC) to review the outcome of its previous policy decisions and recent economic developments, and to decide on the direction of the Central Bank Rate (CBR).

According to the latest CBK Weekly Bulletin, international oil prices have continued to decline on account of the threat of new lockdowns amid new COVID-19 infections.

In the week, murban oil price declined to USD 61.61 per barrel on March 25 from USD 66.03 per barrel on March 18.

The MPC maintained the CBR at 7.0%.

The Institute of Certified Public Accountants (ICPAK) says the recent increase in fuel prices is the highest since 2007.

“This means that Kenyans will endure more pain amid the Covid-19 pandemic. Like we may all know that the costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country,” said ICPAK Chairman Rose Mwaura.

“Petrol prices have jumped by Ksh15.82 over the past two months, making it one of the biggest jumps over the period since 2007,” said Mwaura.

“To add pain to injury, mid this month, the Energy and Petroleum Regulatory Authority (EPRA), which is legally mandated to announce monthly fuel price reviews, sent a shock down the spine when it announced a sharp increase of the fuel,” said Mwaura.