The Central Bank of Kenya (CBK) raised its base lending rate to 7.5% in May 2022, marking the first adjustment since April 2020 as inflation reached 6.5% in April, driven by global supply chain disruptions and commodity price pressures.
CBK Governor Patrick Njoroge stated the Monetary Policy Committee (MPC) concluded tighter monetary policy was necessary to stabilize inflation expectations. The 6.5% annual inflation rate in April 2022 represented an increase from 5.6% in March, with food inflation rising to 12.1% due to vegetable price spikes and cooking oil shortages, while fuel inflation climbed to 8.5% amid global oil price surges.
Njoroge highlighted worsening global uncertainties, including the Russia-Ukraine conflict, China's pandemic restrictions, and persistent supply chain issues, which have driven up costs for fuel, wheat, and fertilizers in Kenya. The MPC noted these factors exacerbated inflationary pressures, particularly after the 12-month export growth of 11.1% in April 2022 compared to the same period in 2021.
Despite economic recovery signs, survey data showed businesses remained concerned about inflation and geopolitical risks. The banking sector maintained stability with a 14.1% non-performing loan ratio and 11.5% growth in private sector credit. The MPC pledged to monitor developments and could reconvene earlier than scheduled if needed, with a planned meeting in July 2022.
