Kenya: Inflation drops to lowest level since May 2022 in July
Inflation dropped to 7.3% in July (June: 7.9%), lower than the expectations of both the Central Bank of Kenya and market analysts and reaching the Bank’s target band of 2.5–7.5%. The figure was largely due to slower growth in prices for food and non-alcoholic beverages, as well as a moderation in price growth for housing and utilities. Meanwhile, transport prices increased at a brisker pace, driven by higher gasoline price pressures; on July 1, the government doubled value-added tax on petroleum products to 16%.
Annual average inflation edged down to 8.7% in July (June: 8.8%).
Lastly, consumer prices increased 0.10% in July over the previous month, slowing down from June’s 0.75% rise. July’s result marked the weakest reading since September 2020.
Inflation should decrease from current levels in H2 2023, likely due to the lagged impact of monetary tightening. However, the ongoing weakness of the shilling, increases in electricity prices, and the introduction of new taxes in July will continue to exert upward pressure on prices. A potential legal overturn of the tax increases is a risk to the outlook: A judicial decision is expected by the end of September.