Cost of living set to go up as high fuel prices weigh in

By NJIRAINI MUCHIRA

Over the past five months, Kenyans have enjoyed relative calm as the economic turmoil that characterised part of last year has been easing.

Since last November, inflation has been on the decline. The prices of fuel have been falling due to a decline in the international crude prices and a stronger shilling, while interest rates, though still high, have stabilised.

Traders shop at one of the supermarkets. Higher fuel prices will have ripple effect on the price of commodities leading to high cost of living. [Photo: FILE/STANDARD]

While the relative stability of the macro-economic factors have translated in a resurgent of economic activities, experts reckon that another round of turbulence could be coming. Government efforts to achieve the equilibrium could be eroded by external factors.

Speaking on Wednesday during a Petroleum Institute of East Africa forum, Finance Minister Njeru Githae said the Government intends to continue tightening monetary policy to dampen inflationary pressures and stabilise the exchange rate.

In particular, Githae said the Government was hoping inflation could maintain a downward trend to a single digit in the coming months.

" Inflation is going down and we are hoping the trend can continue for another month or two," he said, adding that stability is the primary focus for Treasury and the Central Bank of Kenya, which has maintained the central bank rate at 18 per cent since November.

Inflation peaked at 19.72 per cent in November last year from 5.42 per cent in January, but started declining to 15.61 per cent last month.

But is Githae unrealistically optimistic? This is the question in the minds of many as all signs show the country could witnesses the return of rising inflation driven by high fuel prices and its ripple effects.

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Newsdesk 18th June 2013