Costly loans as CBK raises key rate to 7.5pc
Central Bank of Kenya (CBK) yesterday increased the base lending rate to 7.5 per cent for the first time after two years at the back of a lending spike by banks and pressures to mitigate financial disruptions in the global market.
This will see households and businesses grapple with expensive loans from next month after the Monetary Policy Committee (MPC) moved to tighten policy to save local currency from further depreciation.
CBK noted that the banking sector remains stable and resilient with the private sector credit increasing to 11.5 per cent in April 2022, from 9.1 per cent in February. The strong growth was mainly experienced in the transport and manufacturing sectors, recording 28.9 per cent and 12.0 per cent rise respectively.
Commodity prices
“The Committee noted the elevated risks to the inflation outlook due to increased global commodity prices and supply chain disruptions, and concluded that there was scope for a tightening of the monetary policy in order to further anchor inflation expectations,” CBK Governor Patrick Njoroge said.
Overall inflation as measured by the Consumer Price Index (CPI) increased to 6.47 per cent in April, the highest in 7 months since 6.91 per cent in September 2021. This was hugely contributed by the global spike in crude oil prices tied to the war in Ukraine that posed a domino effect on the price of essential commodities.
