On May 30, 2022, the Central Bank of Kenya raised its policy lending rate by a quarter percentage point to 7.50 percent to combat rising inflation and stabilize the Shilling.
The decision was in line with the expectations of most analysts, who had predicted a further increase in the policy rate in the coming months due to inflationary pressures caused by rising oil prices and the economic fallout from the Russia-Ukraine conflict.
The inflation rate, which measures the annual change in the cost of living, hit 6.47 percent in April, up from 5.56 percent in the previous month, according to the Kenya National Bureau of Statistics.
CBK's inflation-targeting Monetary Policy Committee (MPC) noted that while the economy shows strong resilience, shocks from food shortages, a weak shilling, and imported inflation could lead to a spike in consumer goods prices if liquidity is not tightened.
"The Committee noted the elevated risks to the inflation outlook due to increased global commodity prices and supply chain disruptions, and concluded that there was scope for a tightening of the monetary policy in order to further anchor inflation expectations," said MPC chairman and CBK governor Patrick Njoroge.
The Shilling traded at a record low of Sh116.71 against the dollar on the same day, setting the stage for costly imported goods and electricity amid a shortage of the US currency.
