The Central Bank of Kenya has announced an increase in its key interest rate from 10.50% to 12.50%. This decision comes as a response to persistent inflationary pressures within the country and the depreciation of the local currency.
The Monetary Policy Committee has expressed concern over the continued depreciation of the shilling, noting that it has contributed to higher domestic prices and a decrease in purchasing power. This, in turn, has had an impact on the cost of living for Kenyan citizens.
Inflation in Kenya remained largely unchanged at 6.8% in November compared to 6.9% in October. However, it still exceeds the government's target of 5%. The central bank attributed approximately 3.0 percentage points of the overall inflation in November to the depreciation of the exchange rate.
Despite this, there was a slight decline in food inflation during November, dropping from 7.8% to 7.6%. This decrease was primarily driven by lower prices of non-vegetable food items like corn and wheat flour, thanks to improved supply.
On the other hand, fuel inflation increased from 14.8% in October to 15.5% in November. This rise can be attributed to higher international oil prices and the depreciation of the shilling exchange rate.
Non-food, non-fuel inflation also saw a modest decline from 3.6% in October to 3.3% in November.
The Monetary Policy Committee has stated that it will convene again in February but remains prepared to reconvene earlier if necessary.