The Monetary Policy Committee of the Central Bank of Kenya recently revealed that it raised the central bank interest rate by 75 basis points to 8.25% from 7.5%. The committee justified its decision to act by citing growing inflationary pressures and rising global risks, and their likely impact on the domestic economy.
growing inflationary pressures
Following the latest meeting, the Monetary Policy Committee (MPC) of the Central Bank of Kenya (CBK) announced its approval to raise the Central Bank Interest Rate (CBR) from 7.50% to 8.25%. The Monetary Policy Committee, chaired by Central Bank Governor Patrick Njoroge, approved an interest rate adjustment to protect Kenya from a global economic collapse.
With the CBR hike, Kenya’s central bank appears to be following in the footsteps of Nigeria’s central bank, recently raising its monetary policy rate by 150 basis points. However, unlike the CBN, which raised rates after seeing its inflation jump from 17.01% in July to 20.52% in August, the Kenya Monetary Policy Board took steps to raise the CBR by 75 basis points, even as the East African country’s inflation rate jumped to 20.52% in August. It rose only 0.2% to 8.5% in August from 8.3% in July.
To justify its decision, the MPC cited growing inflationary pressures and mounting global risks, and their likely impact on the domestic economy. In a statement, the MPC revealed that it took the step after observing that “there is scope to tighten monetary policy to further anchor inflation expectations.”
While Kenya faces significant global uncertainty like its African counterparts, the results of two studies – a CEO survey and a private sector market perception survey – appear to point to “more optimism about business activity and economic growth prospects in 2022” . “
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At the same time, the central bank warned that it could be forced to take further steps if the situation warrants it.
“The committee will closely monitor the impact of policy measures and developments in the global and domestic economies and stands ready to take additional measures if necessary. The committee will meet again in November 2022, but remains prepared to reconvene earlier if necessary,” the statement said.
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