It will now cost you more to service your loan or access a new one. This is after the Central Bank of Kenya (CBK) increased its benchmark lending rate by 50 basis points to 8.75 per cent - the highest in over three years.
It is the second time in a row that the Monetary Policy Committee, the CBK's decision-making organ, has increased the Central Bank Rate (CBR) in a bid to tame runaway inflation and the weakening of the shilling.
It is the highest that the benchmark lending rate has been since September 23, 2019, when it stood at nine per cent, and comes at a time when the country is grappling with a spike in prices of goods and services as well as a weakening shilling.
“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 further tightening of the monetary policy in order to anchor inflation expectations,” said MPC in a statement yesterday.
“In view of these developments, the MPC decided to raise the Central Bank Rate (CBR) from 8.25 per cent to 8.75 per cent.” The hike spells more pain for borrowers as it means an end to the era of cheap liquidity, which lasted through the worst of the coronavirus pandemic.
It deals a blow to President William Ruto's move to actualise his promise of cheap credit to his support base, which includes jua kali artisans, boda boda operators and mama mbogas, popularly known as the hustlers.
CBK's decision, however, mirrors that of other global central banks, which have continued raising interest rates after the US Federal Reserve raised its benchmark rate, sending shockwaves through financial markets and the economy.
The MPC was adamant that curbing runaway price growth was its main task at present. But its actions will take a toll, as rising borrowing costs typically dampen investment, hiring and consumption.