Kenya’s annual inflation accelerated sharply for a second consecutive month in May, reaching its highest level in more than two years as higher fuel prices pushed up transport and food costs across the economy.

According to the Kenya National Bureau of Statistics, inflation rose to 6.7% year-on-year in May, up from 5.6% in April — the fastest pace since January 2024.

The latest reading pushes inflation close to the upper end of the government’s target range of 2.5% to 7.5%, increasing pressure on policymakers ahead of next week’s interest rate decision.

Fuel Prices Drive Inflation Spike

The sharp acceleration was largely driven by recent increases in domestic fuel prices following the surge in global oil prices linked to tensions surrounding the Iran conflict.

Kenya raised pump prices in both April and May as global energy markets reacted to supply concerns.

The higher fuel costs have quickly filtered through to consumer prices, especially in transport.

Biggest Price Increases

The statistics office identified three major inflation drivers:

• Transport: up 16.5%
• Food and non-alcoholic beverages: up 9.4%
• Housing, water, electricity, gas and other fuels: up 3.4%

Together, these categories account for 57% of Kenya’s consumer inflation basket, making them highly influential in shaping overall inflation trends.

Public Pressure Mounts

The fuel price increases have already triggered unrest in parts of the transport sector, with some operators staging strikes in protest over higher operating costs.

Rising transport costs typically have broader knock-on effects across the economy by increasing the cost of moving goods, which can further push up food and retail prices.

Central Bank Faces Policy Test

Attention now turns to the Central Bank of Kenya, which is scheduled to announce its next interest rate decision on June 9.

The central bank kept its benchmark rate unchanged at its April meeting, but May’s stronger-than-expected inflation print could complicate the policy outlook.

Policymakers now face a difficult balancing act:

• Raising rates could help contain inflation expectations
• Holding rates steady could support economic growth amid external shocks

The upcoming decision will likely signal how concerned the central bank is about whether recent price pressures are temporary or the start of a more persistent inflation trend.