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Inflation dips for a second straight month offering a glimpse of hope

Inflation dips for a second straight month offering a glimpse of hope to Kenyans on the cost of living crisis.

Kenya’s inflation dipped to 9.1% year-on-year in December, down from 9.5% a month earlier, the statistics office said on Friday, easing for the second month in a row on lower food and fuel prices.

Inflation peaked at 9.6% in October, the highest level since May 2017.

Last month Kenya’s central bank raised its benchmark lending rate (KECBIR=ECI) by half a point to 8.75%, saying there was scope for more tightening due to sustained inflation.

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Inflation in December was driven by the increase in prices of food and non-alcoholic beverages, transport, housing, water, electricity, gas and other fuels, the statistics office said.

The drop in the last two months signals glimmers of easing in the cost of living crisis, which has hit the highest levels in nearly five and a half years on soaring food and energy prices.

On a year-on-year basis, the data showed consumers paid 37.7 percent to Sh77.47 for a kilogramme of loose maize, a staple, in December while cooking oil cost 9.1 percent per litre to Sh330.96.

The Central Bank of Kenya, primarily tasked with stabilizing prices, has since May raised the benchmark interest rate by 175 basis points to 8.75 percent, signaling lenders to raise the cost of borrowing.

Increasing the key policy lending rate makes borrowing more expensive, and this is expected to reduce spending by businesses and families with the ultimate goal of lowering the prices of goods and services that have plagued the economy this year.

Inflation has since June breached the upper limit target of 7.5 percent, prompting the CBK to raise interest rates.

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