Kenya’s Central Bank (CBK) on Wednesday announced the steepest base rate hike to deal with inflation and stabilise the local currency, the shilling, whose decline it previously blamed on the international crisis facing the euro.
The CBK’s top policy organ, the Monetary Policy Committee (MPC), announced the four percentage point hike of the Central Bank Rate (CBR) to 11 per cent to stabilise the shilling, ranked the worst performing currency amongst some 160-plus countries in recent weeks.
The base rate is the rate at which the central bank lends money to the banks.
The Kenyan shilling, which has continually lost its value, due to “imported inflation” and the country’s worst drought, which sent food prices rocketing, continues to shed weight.
Central Bank Governor Njuguna Ndung’u said MPC met in Nairobi to review the CBR and settled on 11 per cent, a figure previously demanded by local economists.
The new step is likely to spark a new round of hikes in the cost of financial products but Ndung’u pledged more steps would be taken until the falling shilling is rescued.
According to him, the food shortages, which led to higher inflation, would improve due to efforts to reduce the cost of food prices