The Star (Nairobi)

Kenya: January Inflation Up As Food Prices Rise

KENYANS paid higher prices for most goods last month compared to December, official figures show, an indication than further reduction in lending rates may be halted.

Higher prices of commodities such as milk, wheat flour and sugar saw the overall rate of inflation rising to 3.67 per cent in January, up from 3.20 in December. Price rises were also noted in house rents, cooking gas and other cooking fuels which offset noted lower costs of electricity and kerosine.

For the month, the average price of 500ml packet of milk cost Sh38.31 up from Sh35.89 in December while the cost of a 2-kg wheat flour went up to Sh139.60 up from Sh138.34 the previous month. Prices of commodites such as sifted maize flour went down.

Consequently, the food and non alcoholic drinks' index rose by 1.24 per cent. The housing, water, electricity, gas and other fuels' index went up 1.06 per cent.

The transport index went up by 0.61 per cent despite lower costs of petrol and diesel. "This was mainly due to higher costs of taxi, bus and matatu fares," a statement from the bureau of statistics said.

The rising inlflation rate was also blamed on a 4.3 per cent jump up in the education index on the account of increases in tuition and boarding fees.

The upward swing in inlflation may dampen hopes for cheaper credit going forward. The Central Bank reduces its key lending rate depending on the rate of inflation and the exchange rate.

Last month, the CBR rate was slashed to 9.50 per cent from 11 per cent when inlflation declined from 3.25 per cent in November 2012 to 3.20 per cent in December 2012. The shilling has in recent days lost ground versus the dollar hitting a low of 88 this week, a pointer that any more rate cuts are unlikely.

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