Inflation rate remains high despite government intervention

By Ben Kinyanjui

Lower costs of transport and communication was not sufficient to dent persistent high inflation that dropped marginally to 18.3 per cent in January compared to 18.9 per cent ion December.Sugar prices have dropped but remain relatively high

Transport costs dropped 1.4 per cent driven by lower oil prices that have dropped in the last two months while the cost of communication was down 0.02 per cent but cost of food that is a major driver of inflation went up 0.58 per cent.

“Food and non alcoholics’ index went up by 0.58 per cent between December 2011 and January 2012, “says the Kenya National Bureau of Statistics in its monthly bulletin.

While the prices of sugar, maize flour, rice, green maize and maize grain went down marginally, the prices of tomatoes, sukuma wiki, potatoes, cabbages and onions went up.

Analysts predict that the cost of living would drop this year due to good maize harvest and lower cost of electricity due to increased production of the cheaper water-generated electricity.

However, KNBS data shows that the cost of housing, water, electricity, gas and other fuels went up 0.49 per cent. The cost of cooking gas has remained high due to supply constraints occasioned by inadequate import storage capacity.

“Due to reduced fuel and forex adjustment charges, the cost of consuming 50 units of electricity for example went down from Sh736 in December 2011 to Sh582 in January 2012,” says the bulletin.

The bureau says the cost of education and health services went up by 3.1 due to higher costs of school fees, text books, medicines and treatment charges.

Though the Central bank of Kenya has continued to maintain stringent measures to contain inflation, little has been achieved and the banks regulator might be forced to raise its lending rate higher resulting in higher interest rates.

However, this might be counter-productive as it could fuel economy slow down that would result in higher unemployment.

Sources say over 80 per cent of the factors driving up inflation fall outside CBK’s monetary policy and now require concerted efforts by a cross section of state agencies to address.

Top on the list is increasing food supply by supporting food production that have remained subdued due to high cost of inputs and distortions in the maize subsector.