The economic noose tied around Kenyans as a result of inflation is set to tighten after the Central Bank of Kenya raised the minimum lending rate imposed on loans by banks.
On Thursday, September 29, CBK Governor Patrick Njoroge announced that the Monetary Policy Committee (MPC) had decided to raise the rate from 7.5 to 8.25 percent.
The CBK raised rates to protect lenders from the ripple effects of a spike in inflation rates domestically and globally.
“The committee noted the sustained inflationary pressures, elevated global risks and their potential impact on the domestic economy and concluded that there is scope for tightening monetary policy to further anchor inflation expectations.
CBK Governor Patrick Njoroge addresses MPs at the Safari Park Hotel on Monday September 19, 2022.
“In view of these developments, the MPC has decided to raise the central bank rate (CBR) from 7.50% to 8.25%,” the statement read in part.
The Monetary Policy Committee (MPC) of the CBK further listed the measures put in place by the government to ensure that sufficient funds are raised to meet the budget for the financial year 2022/23.
“The Committee noted that the ongoing implementation of the Government’s budget for the financial year 2022/23, in particular the strong collection of tax revenues, reflects the increased efforts of the tax administration and the increase in the activity economic,” the statement read in part.
He also pointed out that to manage the inflation rates, he should take advantage of the positive economic growth recorded in the country over the past year to protect the country from inflation.
This will be done by tapping into local business investment to counter the effect caused by exchange rate levels due to increased reliance on imported products such as gasoline and palm oil.
Among the sectors showing a promising future is banking, with the CBK reporting an increase in loan repayments and recoveries and a reduction in non-performing loans in the country.
“Strong credit growth was seen in manufacturing (15.2), trade (13.3), business services (16.1) and consumer durables (14.3). number of loan applications and approvals remained high, reflecting improved demand with increased economic activities,” Njoroge revealed.
With the minimum rate raised to 8.25%, banks can now charge up to 15.25% interest on the loans they offer to Kenyans.
However, banks will also prefer to offer credit to the government and blue chips as they fear high default rates from common mwananchi.
Side by side photos of CBK pension towers during the day and with dazzling night lights.