The Kenya National Bureau of Statistics (KNBS) has released Consumer Price Indices (CPI) and rates of inflation for the month of August 2012. The rate of inflation has been on a downward trend since November last year with a drop month-on-month.

The overall inflation rate reduced to 6.09% in August from 7.74% in July 2012. This is well in line with the KNBS earlier projections that the inflation rate will get to single digit numbers before the end of the year. The rate stood at 10.05% in June having stood at an all time high of 19.72% in November 2011.

KNBS attributed the drop to decrease in Food and Non Alcoholic drinks index by 1.09%. This drop is attributed to decrease in the prices of a number of food products. The prices of tomatoes (-7.4%), milk(-3.3%), potatoes(-5.3%), maize flour(-2.4%), cabbages(-6.9%), carrots(-7.6), spinach(-5.2%) and onions (-4.1%) all declined between July and August 2012.

High Inflation rates in November 2010 (19.72%) coupled with a weak shilling then, resulted to a sharp rise in the cost of credit as interest on bank loans shot to an average of 26% in December 2011 up from 14% six months earlier. Central Bank of Kenya's Monetary Policy Committee lowered the base lending rate to 16% from 18% in July showing signs of cheaper loans in the coming days. The MPC meets on September 5th and with declining inflation, the base lending rate is expected to drop further.

[caption id="attachment_18503" align="aligncenter" width="620"] Graph of Inflation from August 2011 to August 2012 (Image: Pesatalk)[/caption]