The National Treasury of Kenya has launched the country’s first-ever report on core and non-core inflation measures. The initiative is aimed at providing policymakers with clearer insights into inflationary trends, allowing for more precise economic interventions to manage the rising cost of living.
The report, unveiled on Tuesday, marks a pivotal milestone in the country’s efforts to tackle inflation, which has been impacting businesses, markets, and households alike. Principal Secretary for the State Department for Economic Planning, James Muhati, highlighted the importance of distinguishing between core and non-core inflation. By doing so, the report offers a more detailed picture of price movements, enabling policymakers to respond more effectively to inflationary pressures.
Core inflation, as defined in the report, tracks price changes in goods and services while excluding food and energy prices. These sectors are typically subject to large and unpredictable price fluctuations, which can distort the overall inflation picture. By excluding these volatile elements, the report provides a more stable and reliable indication of underlying price trends.
According to the Principal Secretary, understanding core inflation is crucial for grasping the relationship between consumer income levels and the cost of goods and services. If essential goods become more expensive while income levels remain stagnant, the purchasing power of consumers diminishes, leading to a reduction in their standard of living. This highlights the need for more targeted economic interventions to mitigate the impact of rising costs on households.
In contrast, non-core inflation includes categories such as food and energy, which experience rapid price fluctuations. By measuring non-core inflation, the government gains valuable insights into the immediate pressures faced by households. This allows for short-term interventions aimed at easing the strain on consumers in times of high price volatility.
The launch of this report is part of Kenya’s broader economic strategy, particularly the Bottom-Up Economic Transformation Agenda (BETA). This framework is designed to foster sustainable socio-economic growth through targeted interventions in key sectors of the economy.
Dr. Kamau Thugge, Governor of the Central Bank of Kenya, and Dr. Macdonald G. Obudho, Director General of the Kenya National Bureau of Statistics (KNBS), were also present at the launch. They emphasized the collaborative effort between the Treasury, CBK, and KNBS in producing a report grounded in international best practices.
As Kenya continues to grapple with rising inflation, this new report is a vital tool for developing policies that can more effectively address the challenges posed by inflation and ensure sustainable economic growth for the future.
