Inflation Rate leaves Target Corridor

Kenya’s inflation crept up to 7.67% in the year to July from 7.39% the previous month, the statistics office said today. The rate was slightly above the central bank’s preferred range of 2.5 – 7.5% and also just a touch higher than the consensus forecast of 7.63%. Analysts said the rate was likely to come down to about 6.6% next month on the back of base effects because there had been a jump in prices of most commodities in the same period last year caused by a new sales tax law.

h3. Lending Rate

“However this is likely to be only temporary, with inflation rising thereafter, and a good chance that it breaches 8% by December,” said Razia Khan, head of research for Africa at Standard Chartered. She predicted policymakers would raise the benchmark lending rate by 50 basis points at their December meeting to keep a lid on the growing inflationary pressures.

The statistics office blamed the inflation uptick last month on a 0.50% increase in the food and non-alcoholic drinks index, which accounts for just over a third of the basket of goods used to measure inflation.

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