Kenya's Central Bank Raises Benchmark Rate to 12.5 Percent amid Depreciating Currency
Kamau Thugge, CBK governor, who chaired a Monetary Policy Committee (MPC) meeting, noted that the exchange rate depreciation continues to exert upward pressure on domestic prices, thereby increasing the cost of living and reducing purchasing power.
"Of the overall inflation of 6.8 percent in November 2023, the exchange rate depreciation contributed about 3.0 percentage points," Thugge said in a statement released in Nairobi, the capital of Kenya.
The MPC noted that public sector external debt service has risen, thereby offsetting some of the gains made towards the government's strong fiscal consolidation.
Thugge added that the continued weakening of the exchange rate is contributing to a significant increase in the Kenya shilling value of foreign currency denominated debt.
He said the adjusted monetary policy stance will address the pressures on the exchange rate and mitigate second round effects including from global prices in order to ensure that inflationary expectations remain anchored.
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