Inflation slows to 4.7% supported by easing pump prices

Inflation slows to 4.7% supported by easing pump prices
File image of a fuel pump. PHOTO| COURTESY

In Summary

  • Inflation falls to a 5-month low 4.7 percent supported largely by falling fuel prices to offset marginally increments in food and housing bills.
  • The new rate abides by the government's target to have inflation average between 2.5 and 7.5 percent to support economic expansion in the medium term.

The Kenya National Bureau of Statistics (KNBS) released its consumer price indices and inflation rates for the month ending January 31, 2019 citing inflation at 4.7 percent, a notable one percent drop from the 5.71 percent recorded in December.

The Transport index, which tracks the average city/country bus fares, fell by 1.4 percent supported largely by the recent drop in pump prices.

The fuel prices in mid January witnessed a significant drop as the Energy Regulatory Commission (ERC) announced a reduction in the maximum retail price of petrol and diesel by almost Ksh.10 for the every litre of the commodity.

Falling transport and fuel costs have helped offset marginal increments in food and housing bills as a result of foreign and inflation charges adjustments.

The prevailing inflation rate is the lowest since August 2018, a period which came prior to the implementation of an 8 percent VAT hike on petroleum products following amendments to the 2018 Finance Bill.

The rate is likewise supportive of the government’s macro-economic fundamentals in the medium term where it hopes to keep inflation at between 2.5 percent and 7.5 percent to support economic expansion.

Inflation could come down further in February as the reduced fuel prices take full effect. Fuel prices have remained low in recent months supported largely by tumbling international crude prices.

The trend could, however, shift should major oil exporters adhere to a cut-back in daily production to support the recovery of prices.

Crude Oil price per barrel for instance rose to Ksh.6255.80 (USD 62) on Thursday from a low of under Ksh.5,000 (USD 50) in December as a result of a number of constrains in oil exporting countries and the prospects of lower supply in Venezuela following US orchestrated sanctions on the country’s oil industry, according to research compiled by the Reuters news agency.

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Story By Kepha Muiruri
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