On Monday, the Central Bank of Kenya took a crucial step to combat rising inflation and stabilize the shilling by raising its policy lending rate by a quarter percentage point to 7.50 percent.
This decision was in line with the expectations of most analysts, who had predicted further rate hikes in the coming months to combat inflationary pressure brought about by rising oil prices and the economic fallout from the Russia-Ukraine conflict.
The inflation rate, which measures annual changes in the cost of living, hit 6.47 percent in April, the highest pace since last September when it stood at 6.91 percent.
CBK's inflation-targeting Monetary Policy Committee (MPC) 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 to further anchor inflation expectations.
CBK governor Patrick Njoroge said, 'In view of these developments, the MPC decided to raise the Central Bank Rate (CBR) from 7.00 percent to 7.50 percent.'
The shilling traded at a record low of 116.71 against the dollar on Monday, setting the stage for costly imported goods such as cars, electronics, farm inputs, and second-hand clothes, as well as electricity amid a shortage of the US currency.
