The Central Bank of Kenya has raised the base lending rate to 9.5% in efforts to curb the rising inflation.
The Monetary Policy Committee (MPC), during their Wednesday meeting, raised Central Bank rate by 75 bases (9.5%) from 8.75% that had been retained in the previous MPC meeting, meaning Kenyans will have to dig deeper into their pockets to repay loans.
“The MPC noted the sustained inflationary pressures, the elevated global risks and their potential impact on the domestic economy and concluded that there was scope for a further tightening of the monetary policy in order to anchor inflation expectations,” said CBK Governor Patrick Njoroge.
Despite the economy experiencing liquidity challenges CBK maintained that foreign exchange reserves, which currently stand at $6.5 billion, continue to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market.
“The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary,” added Njoroge added.
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CBK noted that food inflation rose to 13.3 percent in February from 12.8 percent in January, due to increases in the prices of certain commodities.
“Overall inflation is expected to remain elevated in the near term, partly reflecting further increases in electricity prices. Nonetheless, the long rains will moderate food inflation in the coming months,” said CBK.
The CBK Governor further said that the Committee will meet again in May 2023, or earlier if necessary.
“The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary,” said Njoroge.