Kenya National Bureau of Statistics (KNBS) is expected to release November’s rate of inflation any time today, Friday, November 30, 2012 with analysts predicting a drop of between 3.0 percent to 4.25 percent.

As posted in the Star, all but one of the 11 analysts polled by Reuters predict that the overall inflation rate for November 2012 would fall to a consensus forecast of 3.95 percent. “Inflation may be bottoming out, possibly the November figure will be the tough in the current cycle,” said Phumelele Mbiyo, head of regional research for CFC Stanbic bank.

Why we also believe inflation rate will drop?

November 2012 has seen fuel prices drop. The price of super petrol dropped to KES 113.68 from KES 115.54 and the price of diesel dropped to KES 105.85 from KES 106.11. This price drop could result in a decreased Transport index.

The recent KES 1.14 drop in Kerosene prices and the 8.08 percent drop in electricity bills could result in a drop in the Housing, Water, Electricity, Gas and Other fuels’ index.

Given long term effect of fuel price drop on food prices there could also be a possible drop in the Food and Non Alcoholic drinks index.

 If the above three indexes drop, or at least two, the overall effect would be a drop in the Consumer Price Indices (CPI). A CPI measures change in the price level of consumer goods and services purchased by households.

The overall inflation rate would be the percentage change of November 2012 CPI from November 2011 CPI.

October 2012 CPI stood at 132.46, based on the above price drops the CPI could drop.

Let’s assume the CPI drops to 132.20, 0.26 less than October's CPI, the overall rate of inflation will drop to 2.37 percent.