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Kenya: CBK Raises Base Lending Rate to 7.5%, Cites Elevated Risks to Inflation Outlook

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Nairobi — The Central Bank of Kenya (CBK) has raised the base lending rate to 7.50 per cent citing elevated inflation risks due to increased global commodity prices and supply chain disruptions.

The apex bank has retained the rate at 7 per cent since April 2020 providing an accommodative stance to the economy which suffered disruptions from the Covid-19 pandemic.

“The Monetary Policy Committee noted the elevated risks to the inflation outlook and concluded that there was scope for a tightening of the monetary policy in order to further anchor inflation expectations,” CBK Governor, Patrick Njoroge said in a statement.

Overall inflation increased to 6.5 percent in April 2022 from 5.6 percent in March, mainly due to higher food and fuel prices, according to the Kenya National Bureau of Statistics (KNBS).

Food inflation rose to 12.1 percent in April from 9.9 percent in March, largely on account of vegetable prices due to seasonal factors, and the impact of global supply chain disruptions on cooking oil prices.

Fuel inflation increased to 8.5 percent from 5.8 percent driven by the rise in international oil prices.

“The global economic outlook has become more uncertain, reflecting the impact of the ongoing Russia-Ukraine conflict, uncertainty about the required policy responses in the advanced economies, effects of Covid-19 containment measures in China, and persistent supply chain disruptions,” said Njoroge.

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.