Daily Times

The Central Bank of Kenya (CBK) on Monday tightened the country’s monetary policy by raising the interest rate by 1 percent citing sustained increased inflation.

Kamau Thugge, the CBK governor and the chairman of the Monetary Policy Committee (MPC), said the bank had increased the rate from 9.5 percent to 10.5 percent to “anchor inflation expectations.” “The committee noted that the sustained inflationary pressures, the increased risks to the inflation outlook, the elevated global risks, and their potential impact on the domestic economy. The MPC thus concluded that there was scope for further tightening of the monetary policy,” Thugge said in a statement issued in Nairobi, the capital of Kenya.

He said his committee will monitor the impact of the policy measures as well as the developments in the global and domestic economy and stands ready to take further necessary action. Kenya’s overall inflation increased to 8 percent in May from 7.9 percent in April, driven by fuel, food, and non-food items. “Overall inflation is expected to remain elevated in the near term mainly due to recent increase in electricity prices, the removal of fuel prices and associated second-round effects,” Thugge said. He noted that the global economic outlook remains uncertain, reflecting continued concerns about financial sector sustainability in the advanced economies, continued geopolitical tensions due to the Russia-Ukraine conflict, and the pace of monetary policy tightening in developed countries.

In tightening the monetary policy, Kenya is following in the footsteps of the advanced economies that are trying to contain inflation, according to the apex bank.