CBK sees inflation below target despite rising food prices
Kenya’s real gross domestic product posted three consecutive quarterly declines last year painting a grim picture of a faltering economy.
The Central Bank of Kenya (CBK) expects inflation to stay below the target of five percent over the coming months despite the rising food prices.
The apex bank says the overall inflation rate will only rise slightly to four percent in June 2025 from three percent in January as food prices tick higher on seasonality factors including reduced precipitation.
Expected stability in pump prices and the exchange rate are expected to serve as key offsets to the higher food costs.
“Overall inflation is expected to remain below the midpoint of five percent in the near term supported by a low and stable core inflation, the expected easing of energy prices, and a stable exchange rate,” CBK Governor Kamau Thugge said on Thursday.
The country’s overall inflation edged higher in January from 2.8 percent previously to three percent on rebounding food prices.
The food and non-alcoholic beverage index increased by 1.6 percent between December 2024 and January 2025 as food commodities such as tomatoes, onions, and cabbages rose by 17.9, 6.8, and five percent, respectively.
A kilogramme of onions for instance fetched Sh101.37 in January 2025 from Sh91.93 at the same time while a kilo of cabbages shot up to Sh76.87 from Sh60.52 in the same period.
The prices of sukumawiki and oranges also shot up in January with the combined increase being more than enough to offset declines in commodities such as maize grain and sugar.
The jump in the prices of food crops and related items was the main driver of the higher non-core inflation in January 2025 as non-core inflation quickened to 7.1 percent from 5.2 percent in December.
Food crops and related items as part of non-core inflation registered an 8.2 percent rate of change in prices from 5.9 percent previously.
Non-core inflation measures changes in the price of goods and services with erratic costs due to a variety of factors such as seasonality patterns or increased demand for services for food and transportation costs respectively.
The CBK is tasked with maintaining price stability in the economy from its monetary policy-setting role to ensure optimal conditions for economic growth and macro-stability.
The apex bank is obligated to maintain overall inflation at no more than 7.5 percent but not less than 2.5 percent, handing it a five-percentage point range.
CBK’s agriculture sector perception survey indicated expectations for a low to moderate change in food prices in the next three months.
“Most respondents to the January 2025 Agriculture Survey expect some moderate upward pressure on overall inflation in the next three months on account of higher vegetables and cereal prices, attributed to seasonal patterns,” Dr. Thugge added.
Core inflation, which measures changes to overall prices except for food, energy, and transportation costs has remained low, falling to two percent in January from 2.2 percent in December.
The CBK's own core inflation target is usually set with a three percent ceiling.