Headline inflation in Kenya exceeded expectations, accelerating from 7.9 percent y/y in June to a five-year high of 8.3 percent y/y in July.
This acceleration was driven by higher food and non-alcoholic drink prices, which make up around one-third of the inflation basket. Food prices rose by 15.3 percent y/y in July amid prolonged drought and currency weakness, which continues to drive up import prices.
The central bank expects a month-long subsidy to halve the cost of corn flour to bring inflation back within the bank’s 2.5-7.5 percent target range. However, inflation risks remain skewed to the upside, with the currency expected to remain under pressure due to mounting fiscal concerns and election-related uncertainty
