Inflation isn't "things getting expensive"

Every time KNBS publishes the inflation figure, two things happen. The number gets reported, and a large number of Kenyans say some version of "that is not what my shopping costs."

Both are usually correct. Here is why.

What the number actually measures

Inflation is the percentage change in a price index over twelve months. The index is the Consumer Price Index — the cost of a fixed basket of goods and services, weighted by how much a typical household spends on each.

Three things follow from that definition, and they explain most of the confusion.

1. It is a rate of change, not a level. If inflation falls from 7% to 5%, prices are still rising — just more slowly. Prices almost never go back down. "Inflation is falling" and "things are getting cheaper" are different sentences and only one of them is usually true.

2. It is an average across a basket. Food might be up 10% while communication is flat. The headline blends them. If your own spending is nothing like the average household's — and if you are a student, it is not — your personal inflation rate is different from the national one. Neither number is wrong.

3. The weights are someone else's. KNBS weights each category by national household spending patterns. Rent is weighted for the average Kenyan household, not for you.

Core and non-core: the split that matters

This is the distinction that separates people who understand inflation from people who can quote it.

Non-core inflation is food and energy. It moves on weather, harvests, global oil, shipping. It is volatile and it is mostly a supply story.

Core inflation strips those out. What is left moves much more slowly and reflects demand — how much money is chasing how many goods.

Why it matters: interest rates work on demand, not supply. Raising the Central Bank Rate makes borrowing dearer, cools spending, and takes pressure off core prices. It does nothing about a failed harvest or a tanker rate.

So a central bank looking at rising headline inflation asks one question first: which one is moving? CBK's own April 2026 statement, for example, put core at 2.1% and non-core at 10.8% — with the non-core figure driven mainly by vegetable prices. A headline number and a rate decision were pointing in opposite directions, and the split is what explained why.

The target band

CBK targets inflation at 5%, plus or minus 2.5 percentage points. So the band runs from 2.5% to 7.5%.

Inside the band, the central bank has room to weigh other things — growth, credit, employment. Outside it, the central bank has a credibility problem, and credibility is most of what a central bank has. Expectations are self-fulfilling: if people believe prices will rise 10%, they ask for 10% more in wages and price their goods accordingly, and then prices rise 10%.

That is why central bankers sound so careful. They are not being evasive. They are managing a belief.

What inflation does to you, specifically

• Your savings. If your account pays 4% and inflation is 6.6%, your balance is going up and your money is going down. This is the quietest loss in personal finance.
• Your debt. Inflation is good for borrowers on fixed rates. You repay tomorrow's cheaper shillings against yesterday's loan.
• Your salary. A 5% raise against 6.6% inflation is a pay cut. Nominal and real are different words for a reason.