In an effort to control predictions of out-of-control inflation amid weakening shilling in a net import economy, the Central Bank of Kenya has signalled lenders to boost borrowing charges.
The new policy lending rate is the highest it has been since November 2019, when the now-absorbed interest rate regulations were still in place and it was set at 9.0 percent. On account of higher food and energy costs, inflation a measure of the cost of living over the last 12 months rose to a five and a half year high of 9.6% in October from 9.2% in September.
The third signal to increase credit costs in four MPC sessions comes as the economy experiences higher loan demand as it emerges from the economic challenges of Covid-19.
Recent figures from the banking sector reveal that private sector credit increased 13. 3% over the previous year in October, up from 12.5% in August.