Kenyans experienced an increase in the cost of living in July, with inflation rising to 6.5 percent from 6.4 percent in June, according to data released by the Kenya National Bureau of Statistics (KNBS).

This marks the third month in a row that inflation has stayed above the midpoint of the Central Bank of Kenya's target range of 2.5 to 7.5 percent, signaling ongoing price pressures in the economy.

Main Drivers of Inflation

  • Transport costs: These surged by 15.6 percent year-on-year, largely due to the lingering effects of earlier fuel price hikes, despite stable pump prices in the latest fuel price review by the Energy and Petroleum Regulatory Authority (EPRA). Higher transport expenses have increased the cost of moving goods and people, pushing up prices across other sectors.
  • Food prices: The Food and Non-Alcoholic Beverages index rose 9 percent over the past year. Supply challenges linked to weather, transportation, and distribution costs have contributed to these increases.

Price Movements in Selected Food Items

  • Tomatoes fell by 3.7 percent
  • Carrots declined by 3.6 percent
  • Sifted maize flour dropped by 1.6 percent
  • Irish potatoes rose 2.1 percent
  • Mangoes increased by 3.2 percent, the largest monthly rise among selected foods

Additional Inflationary Pressures

  • Core inflation (excluding food and energy) edged up to 3.2 percent from 3.1 percent, indicating broader price increases in the economy.
  • Electricity tariffs rose by 3.5 percent for low consumption households and 3.1 percent for higher consumption levels.
  • Liquefied petroleum gas (LPG) prices decreased slightly by 1.1 percent, offering limited relief for cooking fuel.
  • Prices for alcoholic beverages, clothing, household goods, and healthcare also saw moderate increases.
  • Transport fares within towns increased marginally, while inter-town bus fares declined slightly.

Monetary Policy Outlook

The Central Bank of Kenya recently held its benchmark lending rate steady at 8.75 percent for the second consecutive meeting, reflecting a cautious stance amid ongoing inflation concerns and external economic pressures.

Market watchers will closely observe the upcoming Monetary Policy Committee meeting in August to see if any policy adjustments are necessary to address inflation trends.