Kenya's central bank will not flinch on inflation, its governor said on Tuesday, a day after the bank joined other major African economies in raising interest rates to forestall rising inflationary pressures.
Policymakers raised the benchmark lending rate by 50 basis points on Monday, the first hike in nearly seven years, warning that inflation risks were elevated due to high global prices of commodities.
"We will take all measures necessary to deal with inflation," Patrick Njoroge told a news conference.
Kenya's move to hike rates follows similar actions taken earlier this year by central banks around the continent, including Ghana and South Africa.
Year-on-year inflation in the East African nation surged by a percentage point in April to 6.47%, driven by a jump in prices of food like wheat and maize, as well as fuel.
"There is a present and clear danger of breaching the 7.5% threshold in the next few months," Njoroge said, referring to the government's preferred upper limit for the rate.
East Africa's biggest economy is estimated to have expanded by 7.1% in the first quarter of this year, Njoroge said, adding that it was expected to grow by 5.7% over the year as a whole.
"We see a continuation of the robust growth we saw in 2021," he said.
The economy grew by 7.5% last year, rebounding from its first contraction in nearly three decades the previous year, which was caused by the COVID-19 pandemic.
The shilling has lost 3% against the dollar this year, the governor said, meaning that its performance has been fairly stable compared with peers like the Ghanaian cedi.
He dismissed concerns expressed by the manufacturers association that there was dysfunction in the foreign exchange market, saying that all market participants should adhere to discipline.
"There are no favourites in the market. Follow the rules of the market and you will be ok," he said.
Reuters