Kenya’s cost of living has climbed sharply again after fuel prices pushed inflation to a 28-month peak in May, tightening pressure on households already stretched by rising basic expenses and reduced earnings power.
Fresh figures released by the Kenya National Bureau of Statistics (KNBS) show inflation rose to 6.7 per cent in May, up from 5.6 per cent in April. This is the highest level recorded since January 2024, when it stood at 6.9 per cent, marking a continued upward trend for the second month in a row.
The rise places inflation close to the upper limit of the government’s target band of between 2.5 per cent and 7.5 per cent, signalling growing pressure on household budgets across the country.
A major driver behind the increase is the surge in fuel costs, which has pushed transport expenses higher and spilled over into food and other essential goods. The spike is linked to global oil disruptions triggered by the ongoing conflict in the Middle East.
The Central Bank of Kenya is now facing a tighter policy space, with the rising inflation likely to slow down any further cuts to lending rates. The bank is expected to announce its next rate decision on June 9 after holding the benchmark rate steady in April.
KNBS data shows transport costs recorded the steepest rise at 16.5 per cent in May, while food and non-alcoholic beverages increased by 9.4 per cent. Housing, water, electricity, gas and other fuels rose by 3.4 per cent.
These three categories form more than half of the inflation basket, meaning their movement has a strong impact on the overall cost of living.
Households are also feeling the strain from long-term income pressure, with workers’ purchasing power declining over the years due to higher taxes and rising deductions.
Reports from the Kenya Bankers Association show household purchasing power has dropped by between 10.7 per cent and 12 per cent over the past five years. The group attributes this to increased statutory deductions and slow wage growth.
Among the deductions affecting workers are PAYE, the 1.5 per cent Affordable Housing Levy, the 2.75 per cent Social Health Insurance Fund contribution, and higher National Social Security Fund payments that now exceed Sh6,480 per month for higher earners.
Real wages have continued to fall, with earnings dropping to Sh56,566 last year from Sh62,256 in 2020.
The Middle East conflict has further worsened the situation, pushing global oil prices higher and driving up fuel costs locally. Since the conflict involving the US, Israel and Iran began on February 28, 2026, petrol prices have increased by 20.2 per cent, while diesel and kerosene have gone up by 39.8 per cent and 25.3 per cent respectively.
Even with government efforts to ease pressure, including a reduction in VAT on fuel to eight per cent and a Sh10 cut on diesel, transport costs still rose by 16.5 per cent in May.