Kenya’s inflation drops for the second consecutive time - CNBC Africa

Kenya’s inflation drops for the second consecutive time

East Africa

by Elayne Wangalwa 0

Kenya’s month on month inflation rate has fallen for the second consecutive session. PHOTO: Getty Images

The country’s overall inflation rate stood at 6.43 per cent in the year to October from 6.60 per cent in September within the central bank's preferred medium term range of 2.5-7.5 per cent.

The Kenya National Bureau of Statistics (KNBS) attributed the drop to the notable fall in the cost of food, electricity and fuel costs.

“Between September and October 2014, Food and Non-Alcoholic Drinks’ Index decreased by 0.45 per cent. The decline in food inflation resulted from falls in the prices of several food commodities which outweighed notable rises in the prices of others,” a statement from the statistics office said

During the period under review, the housing, water, electricity, gas and other fuels’ index decreased by 0.23 per cent.

“Contributing to the fall of electricity was fuel cost adjustment which decreased from 5.71 Kenya shillings per KWh in September to 4.79 Kenya shillings per KWh in October 2014,” said KNBS.

Currently, Kenya’s main electricity producer is stepping up its efforts in ensuring it upgrades the country’s power distribution systems.

The East African country is looking at increasing its national power output to 5,000 megawatts by 2016 in order to spur industrial growth. The Kenyan government said that it will spend about 2 billion US dollars in the medium term to upgrade its power distribution systems.

The cost of electricity is meant to reduce by 30 per cent by the end of the year.

According to Steve Biko, director at Hidalgo Group, the wave in the drop of inflation will continue in the coming months.

“It [inflation rate] should have done better though, I was expecting something like 6.1 per cent of 5.9 per cent because of the significant drop in international oil prices and this is also meant to significantly impact oil prices in Kenya,” Biko said.

Meanwhile, Kenya’s neighbour, Uganda’s headline inflation rate rose to 1.8 per cent due the rise in non-food prices.