Kenya Central Bank Raises Key Interest Rate to 10.50% to Tame Inflation

The rate was raised from 8.75% to 9.50% in May.

“The Monetary Policy Committee noted the sustained inflationary pressures, the increased risks to the inflation outlook, the elevated global risks, and their potential impact on the domestic economy… concluded that there was scope for a further tightening of the monetary policy in order to anchor inflation expectations,” the bank said.

Kenya’s inflation rate increased to 8.0% in May from 7.9% in April driven by fuel, food and non-food non-fuel prices.

Food inflation rose to 10.2% in May from 10.1% in April, largely due to a sharp rise in sugar prices, it said.

Fuel inflation rose to 13.6% in May from 13.2% in April, mainly due to the removal of the fuel subsidy, and increases in electricity prices following upward adjustment of tariffs in April, it said.

In addition, fuel inflation remained elevated at 13.8% in February, largely reflecting the scaling down of the fuel subsidy and increases in electricity prices due to higher tariffs, it said.

“Overall inflation is expected to remain elevated in the near term, mainly due to the recent increase in electricity prices, the removal of the fuel subsidy, and associated second-round effects,” it said.

In addition, a mini-survey of the agriculture sector conducted in the first half of June this year revealed that prices of some key food items, particularly sugar and maize, remain elevated, it said.

The committee will meet again in July, but remains ready to reconvene earlier if necessary, the bank said.

Write to Barcelona Editors at [email protected]