(Bloomberg) -- Kenya's inflation surged more than anticipated in April stoked by higher prices of basic good and food items such as cooking oil.
Consumer prices rose 6.5% from a year earlier, compared with 5.6% in March, the Nairobi-based Kenya National Bureau of Statistics said Thursday in an emailed statement. The median estimate of three economists in a Bloomberg survey was 5.7%.
The uptick may persuade the central bank to raise its key interest rate on May 30 as inflation edges closer to the top of its 2.5% to 7.5% target range.
Key Insights
- The spillover from Russia's invasion of Ukraine is fanning inflation, with prices of cooking oil, wheat, fertilizer and fuel soaring. Kenya imports about 44% of its wheat from the two nations, which ship more than a quarter of world supply. The food and non-alcoholic drinks index, which comprises a third of the inflation basket, rose 12.2% from a year ago, compared with 9.9% a month prior.
- The International Monetary Fund expects these price pressures to push average inflation in 2022 to the upper band of the central bank's target.
- Kenya is also likely to face price pressures from Indonesia's palm oil ban. The tropical oil is a key ingredient in laundry soap and is used as a cooking oil. The prices of both have surged.
- The farm-gate price of corn, Kenya's staple, has doubled and millers are struggling to secure enough supplies, according to Joseph Choge, group managing director at Unga Group Plc.
- Below-average rainfall in the current planting season for corn, coupled with high fertilizer prices and shortages of government-subsidized fertilizers are key risks for Kenya's food security.
- Tax proposals contained in the Finance Bill 2022 seeks to increase levies on packaging materials and bottled water, and if passed by lawmakers, may result in price hikes for basic commodities, according to the Kenya Association of Manufacturers, a lobby group.
- Kenya's ongoing fuel crisis has seen oil marketers grapple with intermittent shortages, resulting in rationed sales and stock-outs. Those are seen disrupting transport and food supplies and exerting additional pressure on food prices.
- Housing, water, electricity, gas and other fuels index, with a weighting of 14.6% in the inflation basket, rose 5.5%. That was spurred by an increase in fuel and cooking gas.
- Transport costs rose 6.9% from a year earlier on increased bus fares. The fares are the second single biggest expenditure item in Kenya's inflation basket.
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