Kenyan Inflation Quickens First Month in Three in August

NARIOBI (Capital Markets in Africa) – Kenyan inflation quickened for the first time in three months as food prices increased and has moved outside of the central bank’s target band.

The annual inflation rate rose to 8 percent in August, compared with 7.5 percent in the previous month, the Kenyan National Bureau of Statistics said Thursday in a statement emailed from the capital, Nairobi. Prices increased 0.6 percent in the month.

The economy of the world’s largest shipper of black tea has been hit by the worst drought in three decades that’s curbed output of corn, a staple, pushing up consumer prices. Inflation exceeded the 7.5 percent upper limit of the Central Bank of Kenya’s target range in February for the first time in more than a year and gross domestic product expanded at the slowest pace since 2014 in the first quarter as farming output shrank.

Price growth for food and non-alcoholic drinks, which make up a third of Kenya’s inflation basket, quickened to 13.6 percent in August from 12.2 percent reported in July, the statistics agency said. Food costs rose 1 percent in the month.

The food inflation is “not something that would concern the central bank,” Jibran Qureishi,  East Africa economist at Stanbic Holdings Ltd., said by phone from Nairobi. “Food and vegetable prices will turn around.”

The central bank left its benchmark rate unchanged at 10 percent for a fifth consecutive meeting last month.

Kenya’s shilling has strengthened 1.1 percent against the dollar since an Aug. 8 election in which President Uhuru Kenyatta won a second term. The currency was 0.2 percent stronger at 102.93 per dollar by 3:38 p.m. in Nairobi on Thursday.

The opposition National Super Alliance said an audit of the electoral system showed misuse and disputed the outcome of the vote. The Supreme Court will make a ruling by Friday on the opposition’s petition to annul the result. Any major deterioration in the political or security environment that undermines Kenya’s growth would add to pressure on the credit rating, Fitch Ratings Limited said Wednesday in a report.