Falling electricity prices ease inflation marginally

Money Markets

Inflation eased marginally in December, helped by falling electricity prices. PHOTO | FILE 

By NEVILLE OTUKI, notuki@ke.nationmedia.com

In Summary

• Electricity prices have since September dropped by between 18.7 per cent and 27.4 per cent following the injection of 280 megawatts of geothermal power into the national grid.

Inflation eased marginally in December, helped by falling electricity prices.

Data from the Kenya National Bureau of Statistics (KNBS) shows that the cost of living measure stood at 6.02 per cent, down from 6.09 per cent last month. This is the fourth month in a row that inflation has dropped since it hit a 25–month high of 8.36 per cent in August.

“Contributing to lower cost of electricity was fuel cost adjustment which decreased from Sh3.47 per kWh in November to Sh2.87 per kWh in December 2014,” said KNBS in a statement.

READ: Fuel cost levy on electricity bills hits six-year low

ALSO READ: EA Cables set to gain from fall in copper prices

Food inflation, however, went up by 0.71 per cent reversing last month’s decline while transportation inflation went up 0.91 per cent despite drops in petrol and diesel prices. The KNBS attributed the rise in transport cost to higher fares by matatus, buses and taxis, cashing in on passengers travelling upcountry for the festive season.

The bureau data shows that beef prices went up Sh6.56 a kilogramme to Sh386.66 in December, chicken by Sh15.2 to Sh530.07 a kilo and goat meat was priced at Sh450.74 a kilo – Sh5.96 more expensive. A kilo of offal (matumbo) retailed Sh5.76 higher at Sh230.97.

Electricity prices have since September dropped by between 18.7 per cent and 27.4 per cent following the injection of 280 megawatts of geothermal power into the national grid.

The energy regulator mid-month cut the maximum price of petrol in Nairobi by Sh4.79 per litre to Sh102.01 diesel by Sh3.67 at Sh90.85 per litre and kerosene by Sh4.94 per litre to Sh71.37. The price of kerosene, which is mainly used by low-income households for lighting and cooking, fell by Sh4.94 per litre to Sh71.37.

Like food, fuel prices have a significant impact on inflation in the economy that depends heavily on diesel for transport, power generation and agriculture, while kerosene is used in many households for lighting and cooking.

At 6.02 per cent, the inflation is within government’s preferred target of between 3.5 and 7.5 per cent.