How Inflation is measured in Kenya

  

Date Posted: 8/15/2012 8:32:11 AM

Posted By: moff J  Membership Level: Silver  Total Points: 485

---

Every month the Kenya National Bureau of Standards(KNBS) releases statistics about the levels of inflation in that period. We get information that inflation has fallen, for example, yet we do not feel the impact of that fall. Typically, we may assume that a fall in inflation is supposed to make the cost of living cheaper. This article tries to explain how KNBS measures inflation rates.

KNBS has what it calls a food basket. This is a combination of the basic commodities consumed by the households in Kenya. It contains items such as maize flour, milk, sugar, bread, wheat flour, kerosene, among others.
Every month KNBS takes a combination of 12 of these commodities and compares their prices with the previous month. Items whose prices have fallen bring the rate of inflation down while those whose prices have increased take the inflation rate high.
KNBS then comes up with a mean of the increases and decreases in prices of these commodities and reports it as the inflation rate. If the net outcome is lower than the previous month's, the rate of inflation is said to have fallen and vice versa.

What makes some household not feel the effect of a change in inflation rate is that the commodities that have been chosen for evaluating may not be consumed by that household. This is also the major weakness of this method of measuring inflation since the sample taken to represent the food basket is not representative enough.

---

Next: The bible is one wonder of God. It contains everything
Previous: Differences between local area network and wide area network