Kenya Salary Increase Forecast 2025: Aligning with MPC's Inflation Outlook

Our recent article, Kenya Salary Increase Forecast for 2025, explained the methodology we adopted to derive a 5.75% salary increase forecast for 2025 – Click Here to read this article.

The Kenyan Monetary Policy Committee (“MPC”) met on October 8, 2024, and it always insightful to examine this committee’s thoughts on inflation, to identify if their economic forecasts are different to ours. Our model is forecasting inflation to average 4.40% in 2025, significantly below 5.00%, which is the middle of the inflation target range.

At the meeting, the MPC stated:

“ Kenya’s overall inflation declined to 3.6 percent in September 2024 from 4.4 percent in August, thereby remaining well below the mid-point of the target range. … Non-food non-fuel (NFNF) inflation eased to 3.4 percent in September from 3.5 percent in August, reflecting the lagged effects of previous monetary policy tightening. Overall inflation is expected to remain below the mid-point of the target range in the near term, supported by lower food inflation owing to improved supply from the ongoing harvests, a stable exchange rate, and stable fuel prices.”

“The MPC noted that overall inflation has declined further and is expected to remain below the midpoint of the target range in the near term, supported by stable food inflation attributed to improved supply from the ongoing harvests, a stable exchange rate, and lower fuel inflation.”

As an aside, the Committee decided to lower the Central Bank Rate from 12.75% to 12.00% which should furnish cash strapped employees with some relief.
Given this incoming data, and the fact that the MPC Committee agrees with our forecast that inflation will remain below the midpoint of the inflation target, we remain comfortable with our previous salary increase recommendation:
While this salary increase will provide employees with a real salary increase of 1.39%, it does take cognisance of the increased social security deductions highlighted in our previous article and concomitantly ensure employees maintain their purchasing power.
We will continue to monitor future developments and provide regular updates.

Have questions or need more information about our Kenya salary increase forecast? Our team of experts is here to help. Get in touch with us today to discuss your organization's compensation and benefits strategy.

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