CBK hikes interest rate to control inflation: Kenya’s central bank raised interest rates by a quarter of a percentage point on Monday to curb rising inflation and stabilize the shilling.
The rise in the CBK bank rate (CBR) to 7.50% was in line with the expectations of most analysts. The analysts had said they expected further increases in the federal funds rate in the coming months, as the country fends off inflationary pressures from higher oil prices, and the Russia and Ukraine conflict. Economic recovery in Ukraine after an attack on food supplies.
The Kenya National Bureau of Statistics reported last month that inflation — a measure of annual changes in the cost of living — reached 6.47 percent in April, up from 5.56 percent the previous month.
This was the fastest growth rate since September last year when it was 6.91%.
The Bank of Canada’s inflation-focused Monetary Policy Committee (MPC) said that while the economy has shown strong resilience, food shortages, weak shillings, and imported inflation in the form of higher food prices could push higher if liquidity is in place Consumer goods prices have not tightened.
“With rising risks to the inflation outlook due to rising global commodity prices and supply chain disruptions, the committee concluded that there is room for monetary policy tightening to further stabilize inflation expectations,” MPC Chairman and CBK Governor Patrick told Njoroge after the meeting.
“In light of these developments, the MPC has decided to increase the central bank’s policy rate from 7.00% to 7.50%.”
The shilling traded at 116.71 shillings on Monday, hitting a record low against the dollar and setting the stage for expensive imports such as cars, electronics, agricultural supplies, and second-hand clothing, as well as power as the dollar tightens.
The shilling’s depreciation has sparked fears of a new wave of inflationary pressures, a political concern for the government, which was recently forced to provide fuel subsidies to ease social tensions.
However, tighter liquidity could negatively affect access to credit for individuals and businesses.
Source : Business Daily
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