CBK raises central bank rate from 7.5% to 8.25%

The cost of loans is expected to jump sharply after the lifting of the benchmark lending rate to 8.25% from 7.5% by the CBK. The Central Bank of Kenya says the 0.75% increase is geared at cushioning against increased inflation risks both on the domestic and global scene. The banking regulator stated that 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 the fuel and electricity prices, the impact of tax measures in the 2022/23 budget and global inflationary pressures.

By lifting the benchmark lending rate, the CBK seeks to stamp on inflation by going after demand while at the same time incentivising investments in Shilling denominated assets after significant portfolio outflows triggered by interest hikes in developed economies.