The Central Bank of Kenya (CBK) Monetary Policy Committee (MPC) has raised its base interest rates by 50 basis points to 13 per cent.
CBK noted that the move was necessary to stabilize the local currency against the greenback as well as contain inflationary pressure in the country.
The apex bank seeks to bring the country’s inflation to its target of between 2.5 per cent and 7.5 per cent.
Even though the country’s inflation jumped to 6.9 per cent in January after easing slightly in December at 6.6 per cent, CBK noted that the overall inflation remained sticky in the upper bound of the target range.
The MPC further observed that all key components of inflation-fuel, food, and NFNF had increased in January.
In addition, it noted the continued, albeit reduced, pressures on
the exchange rate and therefore concluded that further action was needed to stabilize prices.
“The proposed action will ensure that inflationary expectations remain anchored, while setting inflation on a firm downward path towards the 5.0 percent mid-point of the target range, as well
as addressing residual pressures on the exchange rate,” stated CBK’s committee.
“The MPC therefore decided to raise the Central Bank Rate (CBR) from 12.50 percent to 13.00 percent,” it added.
The committee, which is set to meet in April has however noted that it will continue to monitor the impact of policy measures as well as developments in the global and domestic economies and will take any action that is deemed necessary.