CBK Raises Benchmark Lending Rate Amid Inflation Concerns

The Central Bank of Kenya (CBK) took decisive action on Tuesday by increasing its benchmark lending rate to 13 percent from 12.50 percent in response to mounting inflationary pressures. The move comes as the overall inflation rate continues to hover at the upper limit of the target range set by the CBK.

Kamau Thugge, Governor of the CBK and chair of the Monetary Policy Committee (MPC) meeting, highlighted the persistent inflationary trends across key components such as fuel, food, and non-food non-fuel (NFNF) items, all of which recorded increases in January. This uptick in inflation, coupled with ongoing, albeit diminished, pressures on the exchange rate, prompted the MPC to take further action to ensure price stability.

Thugge emphasised that the decision to raise the benchmark lending rate is aimed at anchoring inflationary expectations and steering inflation towards the mid-point target of 5.0 percent. Additionally, the rate adjustment seeks to address residual pressures on the exchange rate, thereby fostering macroeconomic stability and supporting sustainable economic growth.

The MPC’s move underscores the CBK’s commitment to proactively managing economic challenges and maintaining price stability in the face of external and internal factors influencing inflation dynamics. By implementing measures to curb inflationary pressures, the CBK aims to create a conducive environment for investment, promote confidence in the financial system, and support overall economic resilience.

As Kenya navigates through evolving economic conditions, the CBK remains vigilant in its efforts to safeguard macroeconomic stability and promote sustainable development. The decision to raise the benchmark lending rate reflects the CBK’s proactive stance in addressing inflationary risks and underscores its commitment to steering the economy towards a path of robust and inclusive growth.