CBK raises lending rates to 7.5pc

The Central Bank of Kenya has raised its benchmark rate by 50 basis points, the first hike in seven years.

The bank’s monetary committee says the hike is meant to match inflation expectations due to a surge in commodity prices.

A statement by MPC has said the decision was taken because of “elevated risks to the inflation outlook due to increased global commodity prices and supply chain disruptions.

This is the first interest rates hike by the bank since 2015. Inflation currently stands at 6.5pc well within the MPC’s target band of between 2.5pc to 7.5pc

The Kenyan economy is facing strong inflationary pressure due to a prolonged drought that has impacted food production, weak shillings that have crippled supply chains, and the negative impact of the Coronavirus pandemic.

The Russia-Ukraine conflict has also affected prices of commodities  “ The Committee noted the adverse impact of the ongoing Russia-Ukraine conflict and other global disruptions on the Kenyan economy through increases in commodity prices particularly fuel, wheat, edible oils and fertilizer” explained CBK boss Dr. Patrick Njoroge who is also the MPC chairman.

The Committee said it was closely monitoring the impact of the policy measures and would review 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. The Committee will meet again in July 2022, but remains ready to re-convene earlier if necessary”.

The international monetary fund expected the Kenyan economy to expand by 5.7pc this year.