Nairobi – A fall in Kenyan food prices pushed inflation lower in July, official data showed on Friday.
The drop defied market expectations, which forecast a slight increase in the cost of living.
The Kenya National Bureau of Statistics (KNBS) said in a statement that inflation eased to 6.62 per cent year-on-year in July from 7.03 per cent in the previous month.
A poll had returned a consensus forecast of 7.20 per cent for the rate.
Kenya’s currency has lost 11.5 per cent against the dollar this year and policy makers have warned there is a risk it could drive inflation higher.
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The central bank raised its benchmark lending rate by a total of 300 basis points since June.
Razia Khan, head of research for Africa at Standard Chartered in London, said the rate would still head higher by the end of the year.
“With the impact of shilling weakness still to be factored in, we see inflation above nine per cent by the year end, justifying the tightening stance of the central bank now,” she said.
The central bank has a medium term inflation target range of between 2.5 and 7.5 per cent.
The food and non-alcoholic drinks segment, which accounts for more than a third of the index, declined by 0.60 percent on a monthly basis.
It was driven lower by a fall in the cost of maize, potatoes and cabbages, the statistics office said.
On a monthly basis, the inflation rose 0.11 per cent from June. (Reuters/NAN)