Kenya’s consumer price index (CPI-) based inflation rate fell to a 17-month low of 5.07 per cent in February against 5.39 per cent in January driven by softer fuel, electricity and food price pressures.
This is the fourth straight month inflation decline in comparison to global trends.
“This fall is mainly attributed to the increase in prices of commodities under; food and non-alcoholic beverages (8.69 per cent), furnishings; household equipment and routine household maintenance (5.41 per cent), housing, water, electricity, gas, and other fuels (4.79 per cent) and transport (4.45 per cent),” the Kenya National Bureau of Statistics says.
Fuel prices for the period 15th February 2022 to 14th March 2022 remain unchanged at Kshs 129.7 per litre for Super Petrol, Kshs 110.6 per litre for Diesel and Kshs 103.5 per litre for Kerosene.
Similarly, the cost of electricity measured by 50 units (kilowatts) was also unchanged at Ksh 796.83 during the month. The price of electricity was reduced by 15.7 per cent in January 2022 marking the first phase of compliance with President Uhuru Kenyatta’s directive to cut the cost of electricity by 30.0 per cent in order to reduce the cost of living.
However, the cost of food remained high due to increased costs of production.
For instance, a two-kilogram pack of sifted maize flour costs Ksh.129.25 from Ksh.126.31 while a 400-gram loaf of white bread costs Ksh 55.85 on average from Ksh.55.19.
500 grams of cooking fat costs Ksh 149.44 from Ksh.142.05.
A kilo of Irish potatoes costs Ksh.78.17 on average from Ksh.76.16 while a kilo of carrots cost more by 2.1 per cent at ksh.83.08.
The government expects the inflation rate to remain within the government’s set range of 2.5 per cent – 7.5 per cent.
“However, concerns remain high on the widening trade deficit as global fuel prices continue to rise due to supply bottlenecks. The rising global fuel prices could deplete the fuel subsidy program currently in place and further lead to a depreciation of the local currency,” according to Cytonn Investments’ projection.
On the other hand, NCBA REsearch Team observes that while the easing trend is welcome, it is becoming apparent that the floor may be closer. In the
wake of the Russia-Ukraine crisis, expectations have been rising with the premium bid on commodities.
“Food including wheat and vegetable oil rose sharply in the week, some to record highs. At the same time, oil prices may stay above $100/barrel for an extended period,” they note in their weekly Fixed Income Report dated 28 February.
“The latter brings to question the sustainability of the government’s fuel subsidy program as reserves wane. Its sustenance may require the sovereign to
dig deeper in its limited coffers or fund it through debt. While the intervention may contain prices, for now, the rising expectations may soon begin to
filter through,” they add.