CBK raises key lending rate by 50 basis points CBK raises key lending rate by 50 basis points

Kenya's Central Bank recently announced a 50 basis points rate hike, a move that is expected to make borrowing more expensive in the country. The rate hike comes as a response to rising inflation rates, particularly driven by factors such as a prolonged drought situation and global fuel prices. In an interview with CNBC Africa, Jesse Ludenyo, a research analyst at Amana Capital, provided insights into the implications of the rate hike on the economy. Ludenyo highlighted the significant impact of inflation on the cost of living in Kenya, with food inflation comprising a substantial portion of the overall inflation rate. He discussed the potential effects on various sectors, including manufacturing and construction, which heavily rely on borrowing to sustain operations. The rate hike is expected to result in a credit squeeze, affecting businesses and individuals who are already grappling with the economic aftermath of the COVID-19 pandemic. Despite the challenges posed by the rate hike, Ludenyo emphasized that the Central Bank's proactive approach aims to curb inflation and stabilize the economy in the long term. He pointed out that the recent decline in global fuel prices and the onset of the short rainfall season in Kenya could help alleviate cost pressures in the coming months. Looking ahead, Ludenyo expressed optimism that inflation would be contained in 2023, as the Central Bank continues to monitor and address economic challenges effectively.