What happened
Kenya's statistics agency in Nairobi said consumer prices rose 7.3% in October from a year earlier, up from 6.8% in September, with food and transport doing most of the lifting. Gasoline hit a record as the Middle East conflict filtered through to pump prices.
The reading beat forecasts. The median of four economists surveyed by Bloomberg was 7%, and the central bank's projection was 6.9%.
Why the central bank is watching
Underlying pressures ticked higher, with core inflation at 4.3% in October from 4.0% in September. Governor Kamau Thugge warned that if crude rises above $110 per barrel - a level surpassed last week - inflation could push past the central bank's target band upper limit of 7.5%.
Fuel has been a shock since the Iran war began in late February. Diesel prices are up 61% and gasoline 48%, sparking public protests. Additionally, bad weather and interruptions in supplies of fuel, grain, and fertilizer tied to the conflicts in Ukraine and Iran are intensifying the pressure.
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The bottom line for your portfolio
Kenya's policy rate has remained at 8.75% since February, but the combination of faster headline and core inflation, record gasoline, and global supply strains raises the prospect of the first interest rate hike since 2024. Shani Smit-Lengton of Oxford Economics said, "We expect headline inflation to average 7.9%" in the fourth quarter, and noted that this would bolster arguments for a 50 basis point increase in December.
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