According to data released on Friday from the Kenya National Bureau of Statistics (KNBS), Kenya’s year-on-year inflation rate increased to 4.5% in August, up from 4.1% in July; marking the highest inflation rate for the East African country since May 2025 and a reversal of the downward trend observed in previous months. The primary drivers of this inflationary pressure were higher prices in the food and transport sectors.
The Central Bank of Kenya (CBK) has a target inflation range of 3-7%. The current inflation rate of 4.5% remains within this target, providing some flexibility for the monetary authorities.
CBK’s Monetary Policy Committee (MPC) had previously cut the Central Bank Rate (CBR) to 9.50% in August 2025 to stimulate lending and economic activity, a decision likely influenced by the previously anchored inflation expectations.
Key Data Points and Trends:
- Year-on-Year Inflation: The 4.5% inflation rate indicates that the general price level in August 2025 was 4.5% higher than in August 2024. This follows a 4.1% year-on-year inflation rate recorded in July 2025.
Meanwhile, monthly inflation was at 0.3% in August, compared with 0.1% a month earlier.
- Sectoral Drivers: The KNBS report highlights that the increase was “largely driven by higher prices of food and transport.”
- Core vs. Non-Core Inflation: In July 2025, a month before this latest report, the Central Bank of Kenya (CBK) noted that core inflation (which excludes volatile food and energy prices) had increased to 3.1%, while non-core inflation (reflecting energy and other prices) rose to 7.2%.
The August data suggests that both these categories, particularly food and energy-related transport costs, continued to contribute to the overall inflation figure.
Lower income earners who spend a larger portion of their income on food and transportation are largely impacted by the rise of these essential items.
However, the increase in inflation may prompt the CBK to re-evaluate its monetary policy stance. While the current rate is within the target range, a continued upward trend could lead the MPC to consider holding or even increasing interest rates in their next meeting to curb inflationary expectations — a shift from the recent trend of rate cuts.
