Central Bank of Kenya (CBK) Governor Kamau Thugge on Tuesday took his biggest monetary policy gamble yet with the country’s largest rate increase since 2011, betting on the move to cushion the shilling and keep a lid on inflation. The higher rate should also tighten shilling liquidity, which should help lower demand side inflation. Bankers warned ahead of the MPC meeting that a rate increase would lead to mass defaults among borrowers given the situation in the economy. “High rates will lead to less credit and that could slow the economy. Bringing back portfolio investors into the market will also take more than a rate increase, economists warn, given the supply problem that has blighted the country’s forex market.

Source: Daily Nation December 08, 2023 03:38 UTC