CBK increases benchmark lending rate to 8.25%

Central Bank of Kenya Governor Patrick Njoroge announced the increase of the benchmark lending rate to 8.25%, representing the sharpest increase since 2015.

This means that Kenyans will pay more to access loans as the CBK tries to tame the inflation that has resulted in a high cost of living.

The benchmark lending rate was increased by 75 basis points from 7.50% to 8.25%

Njoroge said that the Monetary Policy Committee would monitor the impact of the increase in the lending rates and meet to discuss the matter in November.

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

“In view of these developments, the MPC decided to raise the Central Bank Rate (CBR) from 7.50% to 8.25%,” read a statement shared by the CBK governor who serves as the chair of the MPC.

CBK Governor Patrick Njoroge speaking during a past meeting Pulse Live Kenya

To contain global inflation, central bankers are raising lending rates, with the US announcing an increase of 0.75% in September.

This is the third time in a row that the US Federal Reserve has increased its interest rates

READ: You cannot eat GDP - CBK Governor tells MPs

Kenya’s Inflation

The committee noted that overall inflation increased to 8.5% in August 2022 from 8.3% in July, due to increases in food and fuel prices.

Food inflation remained high at 15.3% in July and August, largely due to the high prices of maize, flour, and cooking oil.

Fuel inflation increased to 8.6% in August from 8.0% in July, mainly driven by fuel and gas (LPG) on account of higher international oil prices.

CBK Governor Patrick Njoroge holding Kenya's new generation currency CBK Governor Patrick Njoroge Pulse Live Kenya

“Overall inflation is expected to remain elevated in the near term, due in part to the scaling down of the Government price support measures, resulting in increases in fuel and electricity prices, the impact of tax measures in the FY 2022/23 Budget, and global inflationary pressures,” Njoroge said.

Exports grew by 11% in the 12 months to August 2022, compared to a similar period in 2021.

READ: Inflation overtakes COVID-19 as the world's biggest worry

Tea and manufactured goods exports increased by 10.9% and 20.8% respectively, while horticulture exports decreased by 12%.