Kenya’s Central Bank on Tuesday evening reviewed upwards its key lending rate by another 150 basis points in reaction to sliding shilling that hit the Sh 100 psychological mark against the dollar on Monday.
Cost of living is expected to rise sharply as commercial banks interest rates on loans hit the roof on the measures.
“In view of these developments, the emerging risks, and the consequent need to anchor inflationary expectations, the MPC decided to raise the Central Bank Rate (CBR) from 10.00 percent to 11.50 percent,” said CBK governor, Patrick Njoroge.
The monetary policy committee said it moved to augment instruments for liquidity management by introducing a 3-day Repo and increased Kenya Banks Referrence Rate (KBRR) to 9.87 to tighten liquidity.
“The MPC will continue to monitor external and domestic developments and their implications on the risks to the overall price stability. In particular, the Committee noted the need to closely monitor liquidity conditions in the market,” said Njoroge.
By close of business, the shilling has eased off from a high of Sh 100.70 to Sh 100.55 on increased dollar demand by energy companies.
However there were cases of reported panic by importers on speculation over outcome of the MPC meeting.