Kenya's inflation rate has reached a 40-month high of 7.3 per cent, driven primarily by the rising cost of fuel, which has led to increased transport and food prices. According to the Kenya National Bureau of Statistics (KNBS), the rate is up from 6.8 per cent in September and is now close to the top of the government's target range of 5 to 7.5 per cent. This development is likely to pile pressure on the Central Bank of Kenya as it weighs the cost of living and the exchange rate when setting its benchmark lending rate.
The transport sector was the biggest driver of inflation, with prices rising 17.1 per cent over the past year, the fastest rise among the 13 categories used to compute the Consumer Price Index (CPI). Food and non-alcoholic beverages rose 10.2 per cent, while housing, water, electricity, gas, and other fuels rose 3.7 per cent. On a monthly basis, transport costs rose 1.7 per cent and food 0.9 per cent. The increase in transport costs has had a ripple effect, with public transport fares and freight costs also rising.
The mid-October fuel price review saw the State drop the fuel subsidy for the first time since August 2025, leading to price increases of Sh28.49, Sh12.93, and Sh9.90 per litre for kerosene, petrol, and diesel, respectively. This move has had a significant impact on household incomes, with boda boda fares from Siaya town to Awelo rising 40 per cent between September and October, while matatu fares from Westlands to Kangemi rose 25 per cent.
The Kenya National Bureau of Statistics (KNBS) attributes the increase in inflation to the rising cost of fuel, which has been driven by higher global crude oil prices since the US-Israel attack on Iran in February. The conflict disrupted shipping through the Strait of Hormuz, a key oil route, and there is no clear sign of its end. As a result, businesses are likely to pass higher freight and operating costs on to consumers, amplifying pressure across the economy.
Food remains the largest contributor to the overall cost of living, accounting for 32.9 per cent of the CPI basket and contributing 3.1 percentage points to October's inflation. Transport added 1.7 percentage points, and housing, water, electricity, gas, and other fuels 0.6. The figures also point to a widening gap between core and non-core inflation, with core inflation rising to 4.3 per cent and non-core inflation standing at 15.1 per cent.
The increase in food prices was uneven, with fresh packeted milk rising 4.7 per cent to Sh64.13 for 500 millilitres, cabbages 4.1 per cent to Sh82.38 per kilogramme, and Irish potatoes 2.5 per cent to Sh125.06 per kilogramme. The higher costs have spread to public transport fares and freight, with fares from Kabarnet to Nakuru going up by an average of 8.3 per cent.
The current inflation rate is likely to have significant implications for households and businesses in Kenya. With the cost of living continuing to rise, households may have to adjust their spending habits, while businesses may have to consider passing on higher costs to consumers. The Central Bank of Kenya will also have to carefully consider the inflation rate when setting its benchmark lending rate.
Key points
- Kenya's inflation rate has reached a 40-month high of 7.3 per cent.
- The transport sector was the biggest driver of inflation, with prices rising 17.1 per cent over the past year.
- The increase in inflation is likely to have significant implications for households and businesses in Kenya.
