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June 6, 2008

Kenya raises interest rates to 9%

by Richard Kilner

Story link: Kenya raises interest rates to 9%

Yesterday the Central Bank of Kenya’s Monetary Policy Committee (MPC) met, and decided to add 25 basis points to the Central Bank Rate, which now stands at 9%.

The MPC cited the inflationary pressures, some of which are notably global rather than national concerns, such as rising food prices and the cost of oil.

The Central Bank believes that raising the CBR will give room to combat the excess liquidity currently present in the Kenyan banking system.

Excess liquidity is seen as one of the driving forces of inflation in Kenya, but unlike other factors (especially food prices) it is one that can be addressed on a national level.

In April, inflation stood at 26.6%, whereas last month it had risen sharply to 31.5%.

The Central Bank has resisted urges for it to intervene, stating that many of the problems are global in nature and beyond its control.


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