Kenya’s annual inflation rate climbed to 4.1 percent in July 2025, up from 3.8 percent in June, largely driven by sharp increases in fuel, food, transport and utility costs, according to newly released data from the Kenya National Bureau of Statistics (KNBS).
On a monthly basis, inflation registered a modest 0.1 percent rise in July, marking a slowdown from the 0.5 percent increase recorded in June.
The surge in annual inflation marks the highest rate in eight months and underscores the impact of volatile energy prices on household budgets. Fuel price adjustments announced by the Energy and Petroleum Regulatory Authority (EPRA) added pressure to transport and utility sectors, pushing up costs for petrol, diesel and electricity.
Notably, transport inflation rose as country bus fares, private vehicle operating costs and petrol prices increased, though falling diesel prices offered partial relief.
Food and non-alcoholic beverages also contributed heavily to the higher inflation, with staple items such as maize flour, sugar and cooking oil reporting significant price jumps.
Cooking fuel, power tariffs and utility bills subsequently followed suit, underpinning the broader uptick in household costs.
Although food and energy categories typically drive non-core inflation, core inflation (which excludes food and fuel) remained stable near 2.5 percent, reflecting muted price increases in stable essentials like housing, education, and health services.
Economic analysts warn that persistent fuel costs combined with tight global supply conditions could sustain inflation momentum through the remainder of the year.
The rise to 4.1 percent remains comfortably within the Central Bank of Kenya’s target band of 2.5 to 7.5 percent, but the trend could prompt concerns about further upward pressure on costs if unchecked.
In response, the Central Bank has held its benchmark interest rate at 9.75 percent since June, after a 25-basis-point cut, and is scheduled to review monetary policy on August 12.
Policymakers face a delicate balancing act between supporting growth and anchoring inflation expectations amid economic fragility and ongoing protests over rising living costs.
Across the economy, manufacturers are beginning to feel pressure as purchasing costs for raw materials edge higher, dampening profit margins. Cytonn Financial Services warns that firms may struggle to pass on increased input costs without eroding demand, especially in a politically charged environment where consumers are already sensitive to price shifts.
Consumers have responded to the inflation spike by limiting discretionary spending, with several vulnerable households reporting tighter budgets and making trade-offs between essentials.
While inflation remains controlled by regional standards, the upward trajectory raises questions about cash flow resilience and whether policy interventions or relief on fuel taxation are needed to mitigate cost-of-living impacts.
In closing, Kenya’s inflation rate rose to 4.1 percent in July 2025, lifted primarily by rising fuel,food, utility, and transport prices, even as core inflation held steady. Movement in energy costs will remain the key variable for monetary policy decisions and household affordability in the coming months.
Written By Ian Maleve
