(Adds analyst comment)
By George Obulutsa
NAIROBI, March 29 (Reuters) - Kenya's central bank
raised its benchmark lending rate to 9.50% on
Wednesday from 8.75% previously and said there was room for
further tightening of monetary policy in anticipation of higher
inflation.
At its last meeting in January, the bank's Monetary Policy
Committee (MPC) had held the rate steady.
Kenya's MPC has been somewhat less hawkish than some of its
African counterparts despite inflation remaining stubbornly
high. Inflation rose to 9.2% year-on-year in February from 9.0%
a month earlier, mostly spurred by food and transport prices.
"The MPC noted the sustained inflationary pressures, the
elevated global risks and their potential impact on the domestic
economy, and concluded that there was scope for a further
tightening of the monetary policy in order to anchor inflation
expectations," the bank said in a statement.
A Reuters poll of analysts had forecast that this time the
central bank would raise its key policy interest rate by 25
basis points to 9.00%.
Six of 11 analysts surveyed on March 21-28, predicted a
25-basis-point lift. Three said the bank would hold the rate
steady, while one forecast a 50-basis-point increase and another
expected a 125-basis point-jump to 10.00%.
Razia Khan, chief Africa economist at Standard Chartered,
said the rate rise was "a very encouraging move".
"Most of all it speaks to the seriousness of intent in
making the interbank FX (foreign exchange) market more
functional again," she said by email.
Earlier this month, President William Ruto said
the government was working
with the central bank to revive the interbank foreign
exchange market, which had gone dormant in recent years.
Like other countries in the region, Kenya is experiencing a
jump in prices of basic commodities, which has been worsened by
the worst drought in four decades.
The inflation is one of the grievances opposition leader
Raila Odinga has given as a reason for calling bi-weekly
anti-government protests.
Kenya's economy has also been hurt by the effects of a
weaker currency and a heavy public debt load.
However, the economy was expected to post a strong
performance this year.
"The economy is expected to remain resilient in 2023 despite
the global uncertainties, supported by continued strong
performance of the services sector and expected recovery in
agriculture," the central bank said.
(Reporting by George Obulutsa; Editing by Estelle Shirbon and
Giles Elgood)
george.obulutsa.thomsonreuters.com@reuters.net))
