Kenya Takes Bold Step in Understanding Inflation with Launch of Core and Non-Core Inflation Report

Kenya Takes Bold Step in Understanding Inflation with Launch of Core and Non-Core Inflation Report.

Principal Secretary for Economic Planning, James Muhati (right), alongside Governor of the Central Bank of Kenya, Dr. Kamau Ngugi, during the launch of Kenya's Core and Non-Core Inflation Measures, held on January 21, 2025, at the National Treasury Building.

By MAXIMILLA WAFULA & PATRICK KIMANZI 

The County Diary News 

On January 21, 2025, the Principal Secretary for the State Department for Economic Planning launched Kenya’s first-ever report on core and non-core inflation measures. This launch, held at the Treasury Building Boardroom in Nairobi, marked a significant milestone in the country’s ongoing efforts to better understand and address inflation, which continues to influence markets, businesses, and households alike. The event was attended by several key figures, including the Governor of the Central Bank of Kenya (CBK), Dr. Kamau Thugge, and the Director General of the Kenya National Bureau of Statistics (KNBS), Dr. Macdonald G. Obudho.

The Principal Secretary acknowledged the collaboration between the Kenya National Bureau of Statistics (KNBS) and the Central Bank of Kenya (CBK) in producing the report, emphasizing that the joint effort was grounded in international best practices. This partnership highlights the importance of reliable data in shaping effective economic policies that can respond to inflation with precision and foresight. KNBS has consistently provided the Consumer Price Index (CPI) and headline inflation figures monthly, and the Principal Secretary commended the agency for its dedication to delivering accurate data essential for informed decision-making.

Inflation, as many are aware, is a complex phenomenon driven by numerous factors, and traditionally, a single inflation measure has been used as a general gauge for price changes. However, this broad measure often overlooks critical nuances, such as the influence of volatile sectors like food and energy. This report, therefore, aims to offer a more granular view by distinguishing between core and non-core inflation. By doing so, policymakers can gain a clearer picture of price behavior, allowing for more effective policy responses.

Principal Secretary for the State Department of Economic Planning (center), Governor of the Central Bank of Kenya, Dr. Kamau Ngugi (left), and Director General of the Kenya National Bureau of Statistics (KNBS), Macdonald Obudho (right), pose for a photo during the launch of Kenya's Core and Non-Core Inflation Measures at the National Treasury Building on January 21, 2025.

Core inflation, as defined in the report, tracks the change in the cost of goods and services, excluding food and energy prices, as these items tend to experience large and unpredictable price fluctuations. This approach provides a more stable and reliable reflection of overall price trends. The Principal Secretary stressed that understanding core inflation is essential, as it illustrates the relationship between the prices of goods and services and consumer income levels. If prices for essential goods and services increase but income levels remain stagnant, consumers’ purchasing power diminishes, which ultimately reduces their standard of living.

On the other hand, non-core inflation includes more volatile categories like food and energy. These sectors often experience rapid price shifts, and by measuring non-core inflation, policymakers can better understand the immediate pressures on households, allowing for more targeted short-term interventions.

The Central Bank of Kenya, a key user of CPI data, relies heavily on inflation data to assess its effectiveness in maintaining price stability in the economy. With the release of this report, the Principal Secretary reiterated the importance of a proactive, data-driven approach to inflation, one that not only responds to inflationary pressures but seeks to minimize them, ensuring economic stability in the long term.

This report is also aligned with the government’s broader economic agenda, particularly the Bottom-Up Economic Transformation Agenda (BETA), which is designed to stimulate socio-economic development through high-impact sectors and targeted interventions. The government remains committed to supporting KNBS in its mission to produce accurate and reliable statistics, which are critical to informed decision-making across various government agencies and stakeholders.

In conclusion, the Principal Secretary expressed gratitude to the teams at KNBS and CBK for their collaboration in developing the report and to the media for their role in disseminating vital information. The event marked a crucial step in building a more resilient, stable, and prosperous economy for all Kenyans, with an emphasis on using high-quality data to guide sound economic policies.