Kenyan Central Bank Raises Key Rate by 75 Basis Points – Following its most recent meeting, the monetary policy committee (MPC) of the Central Bank of Kenya (CBK) stated that it has approved a rate increase from 7.50 percent to 8.25 percent. The MPC, which is chaired by the governor of the central bank, Patrick Njoroge, approved the interest rate modification to protect Kenya from the global economic crisis.
The Kenyan central bank seems to have followed in the footsteps of the Central Bank of Nigeria, which recently boosted its monetary policy rate by 150 basis points. In contrast to the CBN, which raised interest rates after its inflation rate jumped from 17.01% in July to 20.52% in August, the Kenyan MPC increased the CBR by 75 basis points even though the East African nation’s inflation rate increased by only 0.2% from 8.3% to 8.5% in July to August.
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The MPC justifies its decision by citing rising inflationary pressures, rising global uncertainties, and their potential impact on the domestic economy. The MPC disclosed in a statement that it took the action after concluding there was scope for a tightening of monetary policy to further anchor inflation expectations.
While Kenya, like its African counterparts, faces substantial global uncertainties, the results of two studies; a CEO survey and a Private Sector Market Perceptions Survey tend to indicate that optimism regarding business activity and economic development expectations for 2022 has strengthened.
In the meantime, the CBK issued a warning that it may be compelled to take further action if the situation demands it. “The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary. The Committee will meet again in November 2022 but remains ready to re-convene earlier if necessary,” the statement said.
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