Inflation is a term that refers to the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling. In Kenya, inflation rates have been on the rise in recent years. According to the Central Bank of Kenya (CBK), the annual inflation rate in Kenya eased marginally to 7.9% in June 2023, down from 8% in the prior month but still above the central bank's preferred range of 2.5% to 7.5%.

How to calculate inflation in Kenya

There are different ways to calculate inflation in Kenya, depending on the time period and the data source. Here are some of the most common methods:

• Annual inflation: This is the percentage change in the Consumer Price Index (CPI) between two months in different years. For example, the annual inflation rate for June 2023 is the percentage change in the CPI of June 2023 and June 2022.
• Annual average inflation: This is the percentage change in the annual average CPI of two corresponding months in different years. For example, the annual average inflation rate for June 2023 is the percentage change in the annual average CPI of June 2023 and June 2022.
• Monthly inflation: This is the percentage change in the CPI between two consecutive months in the same year. For example, the monthly inflation rate for June 2023 is the percentage change in the CPI of June 2023 and May 2023.
• Future inflation: This is an estimate of what the inflation rate will be in a future month or year, based on current trends and expectations. There are different models and methods to forecast future inflation, such as using historical data, economic indicators, surveys, or simulations. One simple way to estimate future inflation is to use the average annual inflation rate of the past few years as a proxy. For example, according to MacroTrends, the average annual inflation rate for Kenya from 2018 to 2021 was 5.36%. Using this as a proxy, we can estimate that the future inflation rate for Kenya in 2024 will be around 5.36%.

Factors contributing to inflation in Kenya

There are a number of factors that are contributing to inflation in Kenya, including:

• Rising food prices: Food prices have been on the rise in Kenya in recent months, due to a number of factors, including drought, rising fuel prices, and the weak Kenyan shilling.
• Increased fuel prices: Fuel prices have also been on the rise in Kenya, due to rising global oil prices. This has had a knock-on effect on the prices of other goods and services, as transportation costs have increased.
• Weak Kenyan shilling: The Kenyan shilling has been weakening against the US dollar in recent months, which has made imported goods more expensive.

Conclusion

Inflation is a complex issue, and there is no single solution that will work for everyone. However, by understanding the factors that are contributing to inflation in Kenya and by taking steps to protect themselves, people can help to mitigate the effects of inflation on their lives.

Use this handy calculator to calculate inflation yuthufu.com

References

• Inflation Rates | CBK: https://www.centralbank.go.ke/inflation-rates/
• Kenya Inflation Rate - June 2023 Data - 2005-2022 Historical - July ...: https://tradingeconomics.com/kenya/inflation-cpi
• Inflation, consumer prices (annual %) - Kenya | Data: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=KE