The Central Bank of Kenya (CBK) has implemented a significant measure that is set to impact Kenyans and the country’s economy at large. The Monetary Policy Committee (MPC) of the CBK has raised its rate from 10.5 percent to 12.5 percent, aiming to address the pressing concerns of inflation and the devaluation of the Kenyan shilling against major global currencies, including the US dollar.
In recent months, Kenya’s inflation rate has been inching closer to 7 percent. Despite a slight ease last month from 6.9 percent to 6.8 percent in October, the country still faces the persistent threat of inflation. The CBK has also issued a cautionary warning about the elevated risk of inflation, indicating the gravity of the situation.
Furthermore, the Kenyan shilling has been grappling with substantial pressure from the US dollar, resulting from heightened demand. Currently, the exchange rate stands at Sh153.3 for one American dollar. In response to these challenges, the CBK stated, “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. 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 decision to raise the CBK rate to 12.5 percent is poised to have cascading effects, impacting various sectors and the general populace. Kenyans are bracing themselves for potential repercussions, particularly concerning borrowing costs, as the increased rate is likely to translate into higher interest rates on loans.
This move by the CBK reflects a concerted effort to proactively address the economic challenges facing Kenya, underscoring the importance of stabilizing inflation and safeguarding the value of the Kenyan shilling. As the nation braces for the impact of this policy shift, stakeholders across various sectors are closely observing how this development will shape the economic landscape in the coming months.
