Rising food, fuel prices lift inflation to five-year high

Inflation has hit a five-year high of 11.70 per cent, driven by higher food and fuel prices that have been on the rise since last year.

This has pushed the cost of living measure further outside the government’s preferred ceiling of 7.5 per cent.

Official data shows inflation has increased from 11.48 per cent in April, making it the highest rate since May 2012, according to the Kenya National Bureau of Statistics (KNBS).

“Between April and May 2017, food and non-alcoholic drinks’ index increased by 1.26 per cent. The food index increased due to rise in prices of sugar, milk, maize grain and other food items,” the bureau said in a statement Wednesday.

“As a result, the year-on-year food inflation rose by 21.52 per cent in May 2017.”

The KNBS also partly attributed the inflation to increases in the cost of kerosene, cooking gas and charcoal.

Food takes up the largest share (36 per cent) of the basket of goods that is used to calculate inflation, followed by utilities such as rent, water, electricity, gas and fuels at 18 per cent.

The cost of flour at posho mills and consumed by the masses, rose the most at 54.3 per cent over the past year to Sh64.33 a kilogramme. 

They have not benefited from a government subsidy of Sh6 billion. It cut the price 90 kg bag of maize to Sh2,300 from above Sh4,000, allowing the 2kg packet of sifted flour to be sold for Sh90 against the market cost of Sh140.

Sugar prices rallied to Sh168.18 a kilo in May from Sh112.60 a year ago and Sh136.45 in April. Half-litre fresh milk pouch increased by Sh12 over the past year to Sh65 per packet in May, but is expected to come down by Sh10 on Thursday.

The drought left about 2.7 million people in need of food aid, posing a political headache for President Uhuru Kenyatta as he seeks a second term.
Policymakers held the benchmark lending rate at 10 per cent this week, saying its policy stance had reduced the threat of demand-driven inflation. Kerosene, used by the poor, rose 38.2 per cent to Sh66.26 while diesel was up 24.8 per cent to Sh89.70.

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