
The Kenya National Bureau of Statistics (KNBS) shall now be including the core and non-core inflations while determining the headline inflation with a view to providing deeper insights and effective responses to the prevailing inflationary trends.
In deriving what constitutes core and non-core inflation, the teams at KNBS and the Central Bank of Kenya are guided by the East African Community guidelines before compiling harmonised Consumer Price Indices.
“We look forward to including the core and non-core statistics together with the usual headline inflation because the measure will go a long way in informing the analysis of inflation development, outlook, and decision making,” Robert Mudida, the director research department at the Central Bank of Kenya stated.
KNBS Director General Macdonald Obudho says core inflation is a more reliable measure of inflation commonly and is used by central banks to inform monetary policy decisions and communication with the public.
“It has become imperative to have an official comprehensive measure of inflation for Kenya,” Muhatia said.
According to Principal Secretary for the State Department for Economic Planning James Muhati, 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 behaviour, allowing for more effective policy responses,” Muhati said.
Inflation is a key macro-economic convergence criterion and countries are required to follow the harmonised procedures of the respective measures.
KNBS produces Consumer Price Indices and publishes headline inflation while the CBK assesses its primary objective of ensuring stability in the general level of prices of goods and services in the economy.
Price stability promotes long-term planning investment and economic growth.
Core inflation is a measure of inflation that excludes prices of highly volatile commodity items. It provides a relatively stable measure of inflation that abstracts from the impact of extreme price volatility associated with supply-side factors.
It is often described as a measure of underlying inflation that mainly captures structural changes in the economy and is a more reliable measure of inflation commonly used by central banks to inform monetary policy decisions and communication with the public.
On the other hand, the headline inflation that KNBS has been releasing at the end of every month, data is not decomposed into core and non-core inflation.
Currently, CBK generates non-food non-fuel (NFNF) as a proxy measure of inflation using KNBS data.
NFNF is computed by excluding food, transport, and energy components from the overall inflation.
While this measure plays a vital role in understanding underlying inflation dynamics, it has become imperative to have an official comprehensive measure of core inflation for Kenya.
This need is informed by the fact that CBK has been transitioning to an inflation-targeting monetary policy framework and recently officially adopted it.