There is a question almost every Kenyan has asked at some point.
Why do prices go up so easily but rarely come back down?
You notice it when the price of your usual shopping changes. You notice it when transport becomes more expensive. You notice it when a meal that once cost KSh 200 starts costing KSh 300.
And then, months later, you hear that inflation has fallen.
So you naturally expect prices to fall too.
But they don’t.
This is where many people misunderstand inflation.
When inflation falls, it usually does not mean that prices have returned to where they were before. It means that prices are increasing more slowly than they were previously.
That difference is small in language but enormous in your wallet.
Inflation is about the speed of price increases
Imagine a loaf of bread costs KSh 60.
A year later, it costs KSh 70.
The price has increased.
If the price then rises from KSh 70 to KSh 73 the following year, inflation has slowed compared with the earlier increase.
But the loaf has not returned to KSh 60.
It is still KSh 73.
This is why people can hear that inflation is falling and still feel that life is expensive.
Their experience is not necessarily contradictory.
Prices can continue rising even when the inflation rate is coming down.
The Kenya National Bureau of Statistics measures changes in consumer prices through the Consumer Price Index, which tracks a basket of goods and services purchased by households.
The important thing is that inflation describes changes in the overall price level, not whether prices are cheap or expensive.
Think about a staircase
Imagine walking up a staircase.
Every step takes you higher.
Now imagine you start taking smaller steps.
You are still going up.
You are simply going up more slowly.
That is roughly what happens when inflation falls but remains positive.
The prices are still increasing.
The increases are simply smaller.
To actually return prices to their previous level, you would need deflation—a sustained decline in the general price level.
And deflation is not necessarily something an economy should celebrate.
Why would businesses lower their prices?
This is where the story becomes more complicated.
Businesses don’t set prices simply because inflation has changed.
They consider their own costs.
A supermarket has to pay suppliers. A restaurant has to pay for food, employees, rent, electricity and other expenses. A transport operator has fuel, maintenance and other costs.
If those costs increase, the business may increase its prices.
Now suppose some of those costs later decline.
Does that automatically mean the final price falls?
Not necessarily.
The business may still face higher wages, rent, financing costs or other expenses.
And even if all costs fall, businesses still have to consider demand and competition.
If customers are willing to pay the current price, there may be little commercial pressure to reduce it.
Wages are part of the story
Suppose a company increases salaries because the cost of living has risen.
That is good news for employees.
But from the company’s perspective, labour has become more expensive.
The company has several choices.
It can accept lower profit.
It can increase productivity.
It can reduce other costs.
Or it can increase prices.
In reality, businesses often make several adjustments at once.
This helps explain why a price increase can become difficult to reverse.
Once the entire cost structure of an economy has changed, returning to the old price is not as simple as reversing one factor.
Rent is another good example
Consider housing.
If construction costs increase because cement, steel, transport and labour become more expensive, developers may charge more for new properties.
Landlords may also face higher maintenance, utilities, financing or management costs.
Even if the price of cement later falls, that does not necessarily mean rent will immediately return to its previous level.
Housing markets respond to many factors at the same time, including demand, supply, location and financing costs.
That is why saying “inflation has fallen, so rent should fall” misses the complexity of how prices are actually determined.
Some prices do fall
It is important not to go too far in the other direction.
Prices can fall.
Technology is a good example.
Competition can push down the prices of some electronic products over time.
Agricultural products can become cheaper when supply is abundant.
Fuel prices can change as global oil prices and other factors move.
Businesses sometimes discount products because demand is weak or because they want to clear inventory.
So it is not true that prices never fall.
The point is that a lower inflation rate does not automatically reverse previous price increases.
Why does this matter to ordinary people?
Because your salary is not meaningful in isolation.
What matters is what that salary can buy.
Suppose your income increases by 5 per cent while the prices of many things you regularly buy increase by 7 per cent.
On paper, you received a raise.
In practical terms, your purchasing power may still have fallen.
This is why inflation can make people feel poorer even when their nominal income has increased.
Your bank account may show a larger number.
Your life may not feel any easier.
This is why “the economy is growing” can sound strange
You can hear that the economy is growing while personally feeling that you are struggling.
Again, both things can happen at the same time.
Economic growth measures the production of goods and services in an economy.
It does not mean every household becomes richer at the same speed.
The benefits of growth can differ between industries, regions and households.
At the same time, the cost of living can change differently for different people.
Someone who spends most of their income on food and transport may experience price changes differently from someone who spends more on other categories.
Your personal inflation rate can therefore feel different from the headline national figure.
Why don’t salaries simply rise with prices?
Ideally, wages would adjust as living costs change.
But wages are not controlled by inflation alone.
They depend on productivity, labour demand, skills, industry conditions, company finances, collective bargaining and government policy, among other factors.
Some workers receive annual increases.
Some receive increases when they change jobs.
Others can go several years without a significant salary adjustment.
This creates a difficult situation when prices rise faster than wages.
The person’s income remains relatively stable while their expenses gradually consume more of it.
What can actually make prices fall?
Several things can contribute.
Increased competition can force businesses to reduce prices.
Higher supply can make goods cheaper.
Lower production costs can reduce the cost of making a product.
Lower fuel or transport costs can reduce some business expenses.
A fall in demand can also push prices down.
But none of these is guaranteed.
And policymakers generally do not want prices to collapse across the entire economy.
A stable economy is usually more interested in stable and predictable price increases than in prices constantly falling.
The price you remember may be gone
This is probably the hardest part to accept.
Sometimes a product that used to cost KSh 100 may simply never return to KSh 100.
That doesn’t necessarily mean someone is secretly keeping prices high.
It may be the result of a permanent change in the cost structure of producing, transporting and selling that product.
The economy moves forward.
Wages change.
Rent changes.
Businesses change.
Supply chains change.
Consumer habits change.
Once all these things have adjusted to a new price level, going back can be difficult.
What should you watch instead?
When you hear that inflation has fallen, don’t immediately ask:
“Are prices coming down?”
Ask:
“Are prices increasing more slowly?”
That is the more accurate question.
And when you receive a salary increase, don’t only ask:
“How much more am I earning?”
Ask:
“How much more can I actually buy?”
That is the difference between looking at money in numbers and understanding purchasing power.
For Kenyan households, that distinction matters.
Because a lower inflation rate can be good news while the supermarket bill remains high, rent remains high and transport remains expensive.
The economy may be experiencing slower price increases.
Your wallet is simply living with the prices created by the increases that already happened.
And that is why, once prices go up, “inflation is falling” does not necessarily mean “things are becoming cheaper.”
