NAIROBI, Kenya May 30 – The Central Bank of Kenya (CBK) has raised the base interest rate to 7.50%, citing high inflation risks from rising global commodity prices and disruptions in the supply chain.
The apex bank has kept the rate at 7% since April 2020, providing a dovish stance to the economy which has suffered from the disruptions of the Covid-19 pandemic.
“The monetary policy committee noted the high risks to the inflation outlook and concluded that there is scope for tightening monetary policy to further anchor inflation expectations,” the CBK Governor said. , Patrick Njoroge, in a press release.
Headline inflation rose from 5.6% in March to 6.5% in April 2022, mainly due to rising food and fuel prices, according to the Kenya National Bureau of Statistics (KNBS).
Food inflation rose from 9.9% in March to 12.1% in April, mainly due to seasonally driven vegetable prices and the impact of global supply chain disruptions on cooking oil prices.
Fuel price inflation rose from 5.8% to 8.5%, driven by the rise in international oil prices.
“The global economic outlook has become more uncertain, reflecting the impact of the ongoing Russian-Ukrainian conflict, uncertainty about required policy responses in advanced economies, the effects of China’s Covid-19 containment measures and disruptions supply chain issues,” said Njoroge.
The Committee noted the negative impact of the ongoing Russian-Ukrainian conflict and other global disturbances on the Kenyan economy through increased commodity prices, particularly fuel, wheat, edible oils and fertilizers.
The three surveys conducted ahead of the MPC meeting (Private Sector Market Perceptions Survey, CEO Survey and Hotel Survey) revealed continued optimism about business activity and economic growth prospects for 2022.
The optimism was attributed to the continuation of the post-Covid-19 recovery, improving employment conditions, easing restrictions on international travel and increased government infrastructure spending. .
Nonetheless, respondents remained concerned about rising inflation, the impact of the Russian-Ukrainian conflict on commodity prices, supply chain disruptions and heightened political activity.
Goods exports remained strong, increasing by 11.1% in the 12 months to April 2022 compared to a similar period in 2021.
The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios. The ratio of gross non-performing loans (NPLs) to gross loans stood at 14.1% in April 2022, compared to 14.0% in February.
Private sector credit growth increased to 11.5% in April 2022 from 9.1% in February
“The Committee will closely monitor the impact of policy measures, as well as developments in the global and domestic economy, and stands ready to take additional action if necessary,” Njoroge said.
He added that the committee will meet again in July 2022, but remains ready to meet again earlier if necessary.