Inflation rate for August climbs to 6.7 per cent

By James Anyanzwa

The cost of living increased further during the month of August occasioned by higher fuel and electricity prices.

Data from the Kenya National Bureau of Statistics (KNBS) released yesterday shows that the general level of prices of goods and services rose by 6.67 per cent compared to 6.02 per cent in the previous month (July).

The statistics body also attributed the growth in the overall month-on-month inflation to a significant increase in the cost of transport, restaurants and hotels and health.

Pump prices

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“The Transport Index increased by 0.84 per cent over the review period, mainly due to increases in the pump prices of petrol, diesel and public transport fares,” said Zachary Mwangi, Acting Director General, and KNBS.

However, the cost of food and non-alcoholic beverages increased marginally by 0.1 per cent.

Inflation has roughly remained within the government’s preferred medium term range of five to seven per cent since August last year.

The Energy Regulatory Commission (ERC) increased retail prices for petrol, diesel and kerosene citing increased global oil prices, higher import cost and the rail development levy of 1.5 per cent introduced by the Government in June.

The prices of petrol grew by Sh2.74 per litre to Sh112.26 and that of diesel by Sh1.58 to Sh104.44 per litre in Nairobi.

The prices of kerosene in the City rose 5.5 per cent to Sh83.93 per litre, impacting negatively on poor households who mostly use kerosene for lighting and cooking.

The price review put pressure on the cost of living with inflation growing to 6.02 per cent compared to 4.91 per cent in the previous month (June).

In July Central Bank maintained its benchmark-lending rate to commercial banks at 8.5 per cent, with a view of spurring household and business spending.

But lending rates by commercial banks still hovers around 17.02 per cent, according to data from Central Bank (July, 2013)

The bank’s Monetary Policy Committee (MPC) noted that inflation had remained within the medium-term target set by the Government, while the exchange rate remained stable.

Official data

The committee noted that declining international oil prices coupled with non-inflationary credit growth support a low and stable short-term outlook for inflation.

Official Government data shows that the economy registered a strong growth rate of 5.2 per cent in the first quarter of 2013, mainly due to stable macroeconomic conditions characterised by a low and stable inflation rate, stable exchange rate, and a strong performance of the agricultural sector, which grew at 8.3 per cent compared with 2.1 per cent in the first quarter of 2012.

Meanwhile, The shilling firmed slightly yesterday as banks cut back dollar positions before the weekend, while a bearish run for shares extended into its fifth straight session. Traders said the market was gearing up for the next Central Bank policy meeting set for September 3.