The Central Bank of Kenya increased its benchmark lending rate by 75 basis points to 7.00% from 6.25% previously. The central bank Governor, Njuguna Ndung'u, said: "The Committee observed that inflation, exchange rate and money market volatility continued to pose a challenge to the economy. Specifically, the debt crisis in Europe continues to have a significant impact on the economy through the exchange rate volatility. Events in the USA and Europe are expected to continue affecting the exchange rate, inflation and the economic recovery."
At its previous meeting the CBK held the rate unchanged, but had previously increased, and subsequently decreased the discount window rate by 75 basis points to 6.25%. The Kenyan central bank last increased the benchmark lending rate by 25 basis points in May this year. Kenya experienced inflation of 16.7% in August, up from 15.5% in July, and up sharply from 9.19% in March this year, according to inflation data from the Kenya National Bureau of Statistics. The Central Bank of Kenya has an inflation target of 5 percent. A Kenyan Ministry of Finance official noted that Kenya is expected to record economic growth around 5-5.5% this year, and 6% next year.
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