Kenya’s inflation records significant drop as fuel prices remain relatively high

Nairobi, Kenya – Kenya’s inflation has significantly dropped to 6.6%, reported in December 2023.

This represents a 0.2% reduction from the 6.8% Consumer Price Index (CPI) recorded in the month of November 2023.

The Central Bank of Kenya (CBK) reported a sharp rise in prices of fuel and some food items, which saw inflation remain above the target figure of 5%.

Fuel prices in Kenya

Prices of fuel increased by 13.7%, accelerated by electricity at 36.4%, kerosene (36%), diesel (924.1%), petrol (19.6%) and cooking gas (1.7%).

This is despite a slight drop in pump prices, reported by the Energy and Petroleum Regulatory Authority (EPRA).

EPRA reduced pump prices by KSh 5 per litre of super petrol, diesel by KSh 2 per litre, and kerosene by KSh 4.01 per litre.

These prices were effected starting December 15, 2023, to January 14, 2024, with super petrol retailing at KSh 212.36 per litre, diesel at KSh 201.47, and kerosene at KSh 199.05.

Food prices in Kenya

Prices of sugar, Irish potatoes and tomatoes maintained an increase of 35.4%, 4.2% and 27.2%, respectively.

Maize flour, wheat flour and cooking oil prices dropped significantly by 14.9%, 4.5% and 0,8%, respectively.

A spot check by News 9 Kenya indicated that 2kg packet of sugar retailed at an average of KSh 430, while a packet of Irish potatoes increased to KSh 800.

Maize flour retailed at a minimum of KSh 149  per 2kg packet, depending on the brand, across various supermarkets and small retail shops.

Wheat flour sold for between KSh 190 and KSh 200 while a litre of cooking oil costs an average of KSh 230.

Is high CBK interest rate helping?

This followed a move by the Central Bank of Kenya to increase the base lending rate to 12.5%, up from 10.5%.

The regulator cited mitigation of the second round effects from the global increase in prices.

“This will ensure the inflationary expectations remain anchored while setting inflation on a downward path towards 5%mid-point of the target range,” said Thugge in a press release on Tuesday, December 5.

CBK Monetary Policy Committee (MPC) chaired by Governor Kamau Thugge said the move is aimed at easing pressure on the exchange rate.

“The exchange rate depreciation continues to exert pressure on domestic prices, thereby increasing the cost of living and reducing purchasing power. The declining exchange rate contributed 3% points to the November inflation,” the MPC said.