The spike in inflation levels in Kenya since mid-march 2022 has forced the Central bank of Kenya to increase its lending rates up to 7.5% from 7%. This is the first time that the Central Bank is raising these rates in 7 years. The Monetary Policy Committee (MPC) has set the new bar on these lending rates following an increase in food and oil prices in the world, subsequently leading to increased global prices that saw inflation in the world markets overall up, from 9.9% to 12.1%.

The inflation levels in Kenya increased to 6.5% in April 2022 from 5.5% in March 2022, all in a one-month window. The high levels have been attributed to the increased cost of food and fuel prices.

Food inflation rose from 12.1% in April, to 9.9% in March mainly because of the vegetable prices due to seasonal factors, as well as the impact of global supply chain disruptions on cooking oil prices. Fuel inflation surged to 8.5% from 5.8% and was influenced by the increase in international oil prices, following the supply disruptions.

The Monetary Policy Committee (MPC) has urged Kenyans to brace themselves for tougher times ahead which made them increase their base lending rate. The committee says that the increase in lending rates was influenced by the global supply chain.

“The committee noted the elevated risks to the inflation outlook due to increased global commodity prices and supply chain disruptions and concluded that there was some scope for a tightening of the monetary policy to further anchor inflation expectations,” read a statement by the MPC. “In view of these developments, the MPC decided to raise the Central Bank Rate (CBR) from 7.00% to 7.50%”

Currently, in the market, a 2kg packet of Maize flour is sold at approximately between Ksh. 155 and Ksh. 165 while the price of wheat is between Kshs.185 to Kshs.195. This has made the price of bread increase by almost Kshs.10. The inflation continues to remain high despite the parliament rejecting a proposal to increase taxes on basic food items.

The Monetary Policy Committee noted the adverse impact of the ongoing Russia-Ukraine conflict and other global disruptions on the Kenyan economy. They also observed that the global market has become more uncertain and unpredictable, reflecting the ongoing Russia-Ukraine war, uncertainty about the required policy responses in the advanced economies, effects of Covid-19 containment measures in China and persistent supply chain disruptions.

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