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Kenya's overall inflation rises to 4.91 pc in June

01 July 2013, 18:06

Nairobi - Kenya's overall rate of inflation rose to a nine-month high of 4.91 percent in June from 4.05 percent in the previous month due to basic food price hikes, the national statistics bureau said on Friday.

The National Bureau of Statistics (KNBS) said the Consumer Price Index (CPI) computed using the geometric mean approach increased by 0.05 percent from 139.52 in May to 139.59 in June.

"Between May and June 2013, Food and Non-Alcoholic drinks' Index increased by 0.18 percent. This marginal increase in the index was an aggregate result of observed rises outweighing falls in the average prices of various food items," KNBS said.

Despite falls in the transport and the housing, utilities and other fuels components of the CPI index, price gains for clothing and footwear and alcoholic beverages and tobacco were sufficient to lift overall CPI.

According to stock market analyst, Razia Khan one would traditionally expect more muted prices pressures at this time of the year.

Khan said declines in inflation are more typical because of the seasonal impact of food prices, adding however, that although food prices rose a very modest 0.18 percentage points month on month they are still almost 13 percent higher than they were in June 2012.

He said the June overall inflation comes ahead of the implementation of budgetary measures that will take effect on July 1.

"Our core view is for policy rates to remain on hold. While headline inflation should continue to rise over the coming months, driven by a less-favorable base, it should nonetheless remain within a 5-7 percent range through to the end of 2013, supporting the current level of interest rates," said Khan who is Regional Head of Research at the Standard Chartered Bank.

He said new duty measures aimed at raising revenue and providing a boost to local manufacturers, should add in a small way to overall price increases.

"The bigger impact however will come from credit growth, which is expected to show a robust trend in the coming months, reflecting increased business confidence," Khan said.

"Nonetheless, we expect that this will be offset by ongoing efforts to maintain relatively tight market liquidity in support of the shilling stability."

According to the statistics bureau, Housing, Water, Electricity, Gas and Other fuel's index, declined by 0.03 percent between May and June, mainly due to falls in the costs of electricity.

"On average, the cost of consuming 50kWh of electricity for instance decreased by a 2.25 percent from 6.5 U.S. dollars in May to 6.4 dollars in June," the bureau said.

The Transport Index decreased by 0.66 percent over the review period mainly due to reduction on the pump prices of petrol and diesel.

- Xinhua

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