Another surge in interest rates by 13% for loans
Borrowers should brace for another surge in interest rates after the Central Bank of Kenya (CBK) raised the base lending rate by 50 basis points to 13 per cent, piling pressure on businesses and consumers as CBK seeks to further anchor inflation.
This surge started in June last year when it hit 10.50 per cent from 9.50 per cent due to a rise in non-performing loans in the banking sector before it increased to the 12.5 per cent mark by December.
Kamau Thugge’s Monetary Policy Committee (MPC) which down-played the Kenya Banker’s Association plea to stay the rate at 12.50 per cent said it made the decision in the wake of persistent inflation across key sectors including fuel, food, and non-food non-fuel (NFNF) and the ongoing exchange rate pressures.
That the MPC’s strategic move aims to anchor inflationary expectations, set a firm downward trajectory for inflation towards the 5 per cent mid-point target, and address residual exchange rate pressures.h
Thugge said the proposed action will make sure that inflationary expectations remain anchored, while setting inflation on a firm downward path towards the 5 per cent mid-point of the target range, as well as addressing residual pressures on the exchange rate. The Monetary Policy Committee therefore decided to raise the Central Bank Rate from 12.50 per cent to 13 per cent.
The decision means that businesses and consumers have to re-align to the new rate.Earlier, KBA had observed that a decrease in inflationary pressure suggested a more stable economy, which could be supported by maintaining the current interest rate.
Another surge in interest rates by 13% for loans
