Central Bank of Kenya raises rate to 8.75 percent
Central Bank of Kenya’s Monetary Policy Committee has raised the Central Bank Rate (CBR) from 8.25 percent to 8.75 percent.
The Committee asserted that it had determined that further tightening of monetary policy was required to stabilize inflation expectations after taking into account the persistent inflationary pressures, the elevated global risks, and their potential effects on the domestic economy.
“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,” read a press statement by Central Bank Governor Patrick Njoroge.
After reviewing the outcomes of its prior decisions and actions taken to lessen the detrimental economic impact and financial disruptions, the committee noted that the cost of food and fuel increased the overall inflation rate from 9.2 percent in September to 9.6 percent in October 2022.
Food inflation increased to 15.8% percent in October from 15.5 percent in September, primarily as a result of higher prices for maize, milk, and edible oils as a result of disruptions in the global supply chain, as well as higher prices for wheat products.
From 11.7 percent in September to 12.6 percent in October, fuel inflation rose primarily as a result of reductions in fuel subsidies, increases in electricity costs as a result of higher tariffs, and increases in transportation expenses.
The committee further observed The CBK’s foreign exchange reserves, which are at USD 7.038 million (3.94 months’ worth of import cover), continue to offer sufficient protection and a cushion against any short-term shocks in the foreign exchange market.
The committee also noted that real GDP increased by 5.2% in the second quarter of 2022, indicating continued strong performance of the Kenyan economy.
“This performance reflects robust activity in transport and storage, wholesale and retail trade, information and communication, real estate, and financial and insurance,” reads part of the press release.
The Committee will meet again in January 2023.