The Central Bank of Kenya (CBK) increased the base lending rate to 12.5%, up from 10.5%.to contain inflation and Kenyan shilling depreciation against major global currencies such as the American Dollar, among others.
The Kenyan inflation rate has been edging closer to 7 percent for a few months. Last month, for example, the country’s inflation eased slightly to 6.8 percent from 6.9 percent in October.
“The MPC therefore concluded that there is need to adjust the monetary policy stance to address the pressures on the exchange rate and mitigate second round effects including from global prices,” CBK said in a statement.
The committee chaired by CBK governor Kamau Thugge said it expects inflation to be further reduced to 5% mid-point of the target range.
“This will ensure that inflationary expectations remain anchored, while setting inflation on a firm downward path towards the 5.0 percent mid-point of the target range.”
The upward revision now complicates efforts to have cheaper and affordable credit as households continue to struggle with the high cost of living.