The Central Bank of Kenya (CBK) is widely expected to lift its benchmark lending rate again when it holds its Monetary Policy Committee (MPC) meeting on Wednesday.
The expectations on the reserve bank’s monetary stance are largely anchored on prevailing high inflation which in June breached the targeted upper limit of 7.5 per cent to stand at 7.9 per cent in June.
In a pre-emptive move at the end of May, the Central Bank of Kenya (CBK) lifting its benchmark lending rate known as the Central Bank Rate (CBR) for the first time in seven years to 7.5 per cent from a flat seven per cent to curb rising inflation.
A further 50 basis points rate hike, the same as in May would move the base lending rate to above the prevailing inflation rate pointing to the efforts by the reserve bank to tame higher living costs.
The CBK’s recent monetary policy tightening is welcome. The Central Bank should stand ready to continue to adjust its stance to limit second-round effects from higher food and fuel prices to keep inflation expectations well-anchored amid a temporary increase of inflation above the target band,” the IMF stated.
The multi-lateral lender expects the rate of inflation to roam above the 7.5 per cent ceiling in coming months before settling at a mean 7.3 per cent for the year.