CBK governor, Prof Njuguna Ndung’u. CBK has been accused of dancing to the tune of politicians at the expense of the economy and was rated by a Reuter survey as the poorest policy maker in 2011. Photo/FILE
By PAUL WAFULA pwafula@ke.nationmedia.com
Posted Wednesday, December 28 2011 at 22:30
Posted Wednesday, December 28 2011 at 22:30
The rate of inflation has reduced for the first time this year, raising hopes that the rising cost of living will not spill into next year.
Official data from the Kenya National Bureau of Statistics show that the rate of inflation in December slowed down to 18.93 per cent from 19.72 per cent reported in November, mainly helped by a stronger shilling and reduction in cost of major food items, electricity and fuel. (READ: Kenya’s inflation rate hits 19.7 pc)
“The prices of sugar, mangoes, maize flour, maize grain and rice went down by 3.44, 7.11, 1.34, 1.97 and 1.23 per cent, respectively,” read the report in part.
However, the festive season saw the prices of beef with bones, bread, tomatoes, onions and chicken go up by 2.77, 1.82, 2.30, 4.54 and 3.14 per cent, respectively, eating into the gains from other food products.
The cost of living has been rising for 13 straight months to November’s 19.72, the highest level this year, in back-to-back increases that have reduced consumers’ purchasing power and slowed down the country’s economic growth.
The latest economic update shows that the high cost of living saw Kenya’s economy expand by 3.6 per cent in the third quarter, slower than the 5.7 per cent reported in a similar period in 2010.
This has put policy makers under increasing pressure for failure to contain inflation.
The high cost of living has also led the country to one of its worst labour unrest, causing the government and corporate companies sleepless nights as trade unions call for one strike after the other demanding higher pay for workers.
But it is the Central Bank of Kenya (CBK) that has mainly been on the spot for failing to respond to market indicators to reduce the money in circulation in time, a policy stance blamed for the weakening shilling against other currencies.
CBK has also been accused of dancing to the tune of politicians at the expense of the economy and was rated by a Reuter survey as the poorest policy maker in 2011.
It’s Monetary Policy Committee, which meets on January 11 next year, will now rest easier owing to the lower inflation rate.
Many experts had expressed fears that CBK’s highly criticised abrupt interventions may not yield the desired results.
Rapid depreciation of the shilling, which touched a low of Sh107 to the dollar in October, forced the CBK to raise the benchmark interest rate (CBR) by a total of 11 percentage points to 18 per cent.
The decision, which caused great pain to borrowers, has so far managed to reverse the shilling’s performance, helping it gain more than 20 per cent value to the current average of Sh84 to the dollar in Wednesday's trading.
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