On Wednesday 29, Monetary Policy Committee (MPC) raised Central Bank rate by 75 basis points to 9.5 percent from 8.75 percent. This implies that Kenyans will have to dig deeper into their pockets to repay loans.
The Committee said that it noted the sustained inflationary pressures, the elevated global risks and their potential impact on the domestic economy prompting the need to tighten lending rate.
Read: Kenya’s Business Environment Deteriorates On The Back Of High Inflation
Kenya’s inflation rate for the month of February increased to 9.2 percent from 9.0 percent the previous month.
“There was scope for a further tightening of the monetary policy in order to anchor inflation expectations. In view of these developments, the MPC decided to raise the Central Bank Rate (CBR) from 8.75 percent to 9.50 percent,” MPC Chairman Patrick Njoroge said in a statement.
Earlier this week, the Central bank of Kenya revived the inter – bank currency market due to dollar scarcity and weakening shilling.
The currency has weakened amid diminishing foreign-exchange reserves, a deteriorating balance of payments, and rising global interest rates that have raised the cost of debt servicing.
Read: Kenyans Afflicted With Soaring Cost Of Living
The Committee further noted that uncertainties in the global economic outlook have increased, reflecting concerns about financial sector stability in the advanced economies, continuing geopolitical tensions and the pace of monetary policy tightening in the advanced economies.
However, raising the rate will have an impact on economic growth which has been projected to expand by 5.1 percent this year, compared with 5.3 percent in 2022, according to International Monetary Fund (IMF) estimates.
In addition, the higher cost of loans risks locking out businesses from accessing the credit they need for expansion and in turn, limiting their ability to create more jobs.
Email your news TIPS to editor@thesharpdaily.com
