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Kenyan Inflation Breaches Central Bank Target After Tax Measure

Kenyan inflation accelerated in September, breaking through the upper limit of the central bank’s target range, after the government increased the number of items subject to value-added tax and gas prices rose.

The rate climbed for a fourth straight month to 8.3 percent from 6.7 percent in August, the Nairobi-based Kenya National Bureau of Statistics said today in an e-mail. Prices rose 1.8 percent in the month. The median estimate of 3 economists surveyed by Bloomberg was 7.4 percent.

“Basic food prices increased partly because of VAT,” Vimal Parmar, head of research for Nairobi-based Burbidge Capital, said by phone before the figures were released. Food costs increased 2.9 percent from the previous month.

The government this month began applying the 16 percent value-added tax on a wider range of goods, putting pressure on consumer prices. Adding to that, the cost of petrol increased in September by 1.4 percent in Nairobi.

Monetary policy makers next convene in November to review the key lending rate, which was left unchanged for the second meeting at 8.5 percent on Sept. 3. The government targets 5 percent inflation, plus or minus 2.5 percentage points.

Treasury Secretary Henry Rotich said on Sept. 27 that the country’s economic growth target for 2013 remained at 5.5 percent to 6 percent even after a four-day attack by Islamist militants on a Nairobi shopping mall left at least 67 civilians and security forces dead. Five militants were killed in the standoff with security forces that ended on Sept. 24.

To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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