(Bloomberg) -- Kenya’s inflation rate climbed more than expected and exceeded the ceiling of the central bank’s target range for the first time in almost five years, increasing pressure on policy makers to hike the key interest rate.
Annual inflation accelerated to 7.9% in June from 7.1% a month earlier, Nairobi-based Kenya National Bureau of Statistics said Thursday in an emailed statement. That’s the highest level since August 2017. The median estimate of six economists in a Bloomberg survey was 7.7%.
The Central Bank of Kenya targets inflation at 2.5% to 7.5%. Inflation has quickened since March, stoked by rising food and record fuel prices stemming from choked supply chains caused by Russia’s invasion of Ukraine.
Annual food and non-alcoholic drink inflation quickened to 13.8% from 12.4% reported in May and housing, utilities and other fuels price growth accelerated to 6.8% in June from 6%.
The breach of the target coupled with dollar-denominated government loans trading at distressed levels -- after the Federal Reserve’s most aggressive rate hike in almost three decades -- adds to pressure on the central bank to raise interest rates more quickly.
The monetary policy committee increased borrowing costs for the first time in almost seven years last month to anchor inflation expectations as concerns about commodity prices build and said it stands ready to take additional measures when necessary.
The East African nation is likely to face increased price pressures on food in coming months due to reduced corn production because of the doubling of fertilizer costs and poor rainfall, according to a World Food Programme study. Plans by the Treasury to end the nation’s fuel subsidy program in the fiscal year starting July 1 is also likely to fan inflation.
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