June inflation hits seven-month high

Politics and policy

A rise in inflation rate means households are forced to shoulder higher commodity prices. FILE 

By NEVILLE OTUKI, notuki@ke.nationmedia.com

In Summary

• Inflation stood at 7.39 per cent in June, up from 7.30 per cent the previous month — making it the fourth increase in a row.

The cost of living rose to a seven-month high in June, just a few points shy of breaching the government’s preferred set ceiling, lifted by rising housing rent, electricity, transport and cooking fuel prices.

Inflation stood at 7.39 per cent in June, up from 7.30 per cent the previous month — making it the fourth increase in a row.

The Kenya National Bureau of Statistics attributed the jump to the sharp rise in electricity prices, charcoal, kerosene, and a select main food items such as maize flour and wheat flour.

At 7.39 per cent for the year to June, the inflation rate is just below the upper limit of the central bank’s target of 7.5 per cent.

Officials have set at 5 per cent with a margin of 2.5 per cent on either side.

Analysts have in the past expressed fears of a likely increase in interest rates should the Central Bank of Kenya respond by pushing up its benchmark lending rate currently at 8.5 per cent to arrest the rising inflation.

READ: Inflation rise to six-month high signals increase in interest rate

A rise in inflation rate means households are forced to shoulder higher commodity prices.

This means the shopping basket of households shrinks with the same level of income due to eroded purchasing power, depressing their demand and denying firms a ready market.

This month’s inflation is the biggest since the introduction of VAT on a number of items in September, second only to October’s which stood at 7.76 per cent.

Kenya has left its key lending rate unchanged at 8.5 per cent since May last year.

But in the recent months, the shilling has faced sustained pressure, forcing the central bank to intervene to maintain its stability.

Kenya’s shilling last month hit a 30-month low, due in part to market nerves following bombings in Nairobi and Mombasa, the east African economy’s main port city.

The shilling, which is now cooling off, traded at Sh87.63 to the greenback on Monday

Electricity prices increased the most after the power regulator raised the fuel surcharge to Sh7.22 from Sh5.19 on heavy use of diesel-powered generators to produce electricity.