The Central Bank of Kenya (CBK) has hiked the base lending rate by 50 basis points in a bid to tame rising inflation and shield the economy from global risks.
The Monetary Policy Committee of CBK in its sitting Wednesday raised the interest rates from 8.25pc to 8.75pc in a bid to ease the rate of inflation which increased to 9.6pc in October from 9.2pc in September.
“The Committee 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 Dr. Patrick Njoroge, CBK Governor.
This is the second consecutive sitting the committee has hiked the benchmark rate in a bid to contain the runaway inflation.
Kenya’s rate of inflation hit a five-year high on account of rising food and fuel prices forcing the MPC to tighten its monetary stance in September.
Food inflation rose to 15.8pc in October from 15.5pc in September, largely due to prices of maize and milk following reduced supply attributed to depressed rains, and edible oils and wheat products due to the impact of international supply chain disruptions.
“Fuel inflation increased to 12.6pc in October from 11.7pc in September, mainly due to scaling down of the fuel subsidy, increases in electricity prices due to higher tariffs, and increases in transport costs,” added Dr. Njoroge.
CBK said domestic economy continues to feel the impact of rapid tightening of monetary policy in advanced economies particularly the U.S, ongoing war in Ukraine, and the lingering pandemic-related disruptions particularly in China.