Kenya's year-on-year inflation rate surged to 6.39% in July, up from 5.80% in June, marking the highest level since March 2016. This increase was predominantly fueled by a significant rise in food prices, which jumped 10.8% compared to 8.9% in the preceding month. The cost of food and non-alcoholic beverages was a major contributor to this inflationary trend, putting a strain on consumer spending.
Beyond food, other key sectors also experienced price hikes. Housing, water, electricity, gas, and other fuels saw a 0.9% increase, while transport prices rose by 0.8%. The transport index, in particular, went up by 1.13% in July due to higher prices for petrol and diesel. The Energy and Petroleum Regulatory Authority (EPRA) had previously maintained fuel prices for July 15 to August 14, with super petrol capped at KES 214.03 per liter in Nairobi and diesel at KES 222.86 per liter. However, global crude price volatility, potentially reaching $95 a barrel amidst an Iran war, poses a risk to these stable prices and could further deplete Kenya's foreign exchange reserves, impacting the shilling and domestic costs.
On a monthly basis, consumer prices increased by 0.6% in July, following a 1% rise in June. While some categories, such as clothing and footwear (+3.5%) and furnishings (+3.5%), saw slight increases, the overall upward trend in inflation highlights persistent challenges for Kenyan households. The central bank recently retained its Central Bank Rate (CBR) at 10.5% and lowered the Kenya Banks' Reference Rate (KBRR) to 8.9% in an effort to manage the economic environment.
