On May 30, 2022, the Central Bank of Kenya (CBK) made a significant move by increasing its base lending rate from 7.0 per cent to 7.5 per cent, marking the first time in 7 years that the rate has been raised.
The decision was made by the Monetary Policy Committee (MPC) in response to the country's rising inflation rate, which has been driven by increased food and oil prices. According to the MPC, the inflation rate rose from 5.6 per cent in March to 6.5 per cent in April 2022.
The MPC attributed the increase in food prices to global supply chain disruptions and seasonal factors, which have led to a surge in vegetable prices and cooking oil prices. Fuel inflation also increased, driven by the rise in international oil prices.
The CBK also noted the impact of the ongoing Russia-Ukraine conflict and other global disruptions on the Kenyan economy, leading to increases in commodity prices, particularly fuel, wheat, edible oils, and fertiliser.
Despite the increase in lending rates, the inflation on food items across the country remains high, with a 2kg packet of maize flour retailing at approximately Ksh155 to Ksh165 and wheat flour going for Ksh185 to Ksh195.
A file image of the Central Bank of Kenya in Nairobi.
