Kenya's inflation drops in July as price of key food items and fuel ease

Inflation in Kenya has fallen to 4.3 per cent year-on-year in July from 4.6 per cent a month earlier, according to new data released by the Kenya National Bureau of Statistics on Wednesday.

The four-year low was helped by a strong shilling and marginal price reductions in key household costs such as electricity and fuel.

This has led to a reduction in transport costs which saw a rise of just 4 per cent in July compared to 7.7 per cent the previous month.

The price of many foods decreased by half a per cent between June and July, but the reprieve did not extend to all categories, with some experiencing sharp increases.

Kenya targets an inflation rate of between 2.5 per cent and 7.5 per cent in the medium-term.

But while overall inflation remains under control, increases in other household costs like cooking oil and cooking gas means consumers still need to tighten their budgets.

In June, Kenyans took to the streets in a wave of deadly protests over tax hikes and the cost of living.

President William Ruto was forced to scrap a proposed finance bill containing the increases in response to the demonstrations.

Ruto, who was sworn in in September 2022, inherited a battered economy grappling with soaring inflation, a high debt burden, unemployment, and post-Covid 19 stagnation.

He has been caught between the demands of lenders such as the International Monetary Fund to cut deficits, and a hard-pressed population reeling from rising costs.

The easing of inflation this month could influence the Central Bank’s decision on interest rates, with a potential rate cut expected when the Monetary Policy Committee convenes on 6 August.