Rising food prices push inflation to highest levels since May 2012

Friday March 31 2017

Ganze residents carry relief food donations, March 30, 2017. FILE PHOTO | NMG

Ganze residents carry relief food donations, March 30, 2017. Inflation has moved further outside the government’s preferred ceiling to hit 10.28 per cent in March. FILE PHOTO | NMG 

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Inflation has hit a 57-month high due to rising food prices that have pushed the rate further outside the government’s preferred ceiling.

Official data shows that inflation hit 10.28 per cent in March, up from 9.04 per cent last month.

This is the highest rate since May 2012, the Kenya National Bureau of Statistics (KNBS) data shows.

“Between February and March, food and non-alcoholic drinks’ index increased by 3.18 per cent. This was mainly attributed to increases in prices of several food items including, spinach, maize flour, milk, potatoes and maize grain,” the bureau said in a statement.

The KNBS attributed the price rally to the recent drought that cut supply.

Food takes up the largest share (36 per cent) of the basket of goods that is used to calculate inflation, making it the main driver of the cost of living.

Irish potatoes

Irish potatoes recorded the highest jump in prices by 33 per cent to Sh98 per kilogramme compared to Sh73 same month last year.

It is followed by maize flour, Kenya’s staple, which rose 27 per cent to Sh132 for a two-kilo packet.

A kilo of spinach was up 27 per cent to Sh58 a kilo while a similar quantity of sugar rose 17 per cent to Sh132.

Rice (grade 1) rose seven per cent in the review period to Sh193 a kilo while grade two of the grain was up 12 per cent to Sh114.

The increases pushed the year-on-year food inflation to a high of 18.56 per cent in March, up from 16.5 a month earlier.

Rainy season

Kenya is, however, entering a rainy season, with expectations of improved food supply and lower prices in coming months. Treasury has also scrapped value added tax on maize flour and bread in what could further help drive prices downwards.

The Central Bank of Kenya has set a target range for inflation at between 2.5 per cent and 7.5 per cent in the medium term, meaning the rate has stayed outside the bank’s ceiling for two months in a row.

The bank’s monetary policy committee expects inflation to stay outside the preferred maximum target in the near term.

“The committee concluded that overall inflation is expected to remain outside the government target range in the near term due to the elevated food prices,” the committee chairman and central Bank governor said last week after holding the benchmark rate unchanged at 10 per cent.

The KNBS also cited rising fuel pump prices as yet another driver of last month’s inflation.

“The transport index increased by 0.27 per cent in March compared to February, mainly on account of increases in the pump prices of petrol and diesel,” the bureau said.