Annual inflation slows in Dec

Kenya's annual inflation rate eased to 27.7 percent in December from November's 29.4 percent, thanks to falls in the cost of fuel and electricity, the National Bureau of Statistics said on Wednesday.

Underlying inflation, which excludes food items from the consumer price index basket, slowed to 10.6 percent from 12.3 percent in the previous month, the bureau said.

Food prices rose 2.6 percent in December from November to stand 37.5 percent higher than a year earlier, but fuel and power costs fell 6.4 percent during month, the bureau said in a statement.

East Africa's biggest economy has been battling soaring inflation, which peaked at 31.5 percent in May, on the back of high commodity prices, such as crude oil and fertiliser, and January's post-election violence which disrupted farming.

Kenya's central bank governor, however, said in November that he expected core inflation to slow soon. It is now running at more than double the bank's target of 5 percent.

A revision of the consumer price basket and methodology used in calculating inflation is also expected to cut the rate sharply in early 2009.

A bureau official told Reuters they will announce in January progress on the revision from a 1997 sample. The weight of food items in the index is expected to be lowered to reflect shifting consumption patterns.

The move is also aimed at bringing data gathering and calculation methods into line with other economies.

The International Monetary Fund believes Kenya's inflation rate is overstated by about 100 percent.