CBK governor Kamau Thugge with Economic Planning PS James Muhati
during the launch of report on inflation measures/HANDOUT
The National Treasury has 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 ministry on Tuesday launched Kenya’s first-ever report on core and non-core inflation measures.
Principal Secretary for the State Department for Economic Planning James Muhati said the report seeks 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,” he said at the launch at Treasury Building in Nairobi.
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 attended the launch.
Inflation is the gradual loss of purchasing power, reflected in a broad rise in prices for goods and services.
When inflation is on the rise, it’s more expensive to purchase goods and services.
The Principal Secretary acknowledged the collaboration KNBS and CBK in producing the report, emphasising 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,” he said.
KNBS has consistently provided the Consumer Price Index (CPI) and headline inflation figures monthly.
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,” he explained.
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 report is also aligned with the government’s broader economic agenda, the Bottom-Up Economic Transformation Agenda (BETA), which is designed to stimulate socio-economic development through high-impact sectors and targeted interventions.