Kenyans are bracing themselves for more expensive bank loans after the Central Bank of Kenya (CBK) increased its base lending rate from 9.5 per cent to 10.5 per cent.

According to the latest update by the Monetary Policy Committee, the sudden double digit increase in the benchmark interest rate will come into full effect within the next 60 days.

CBK said the hike, the highest since it started its tightening measures in March2022, was compelled by a rise in inflation that doesn’t show signs of improving in the months ahead.

In the first meeting chaired by new CBK Governor Dr Kamau Thugge, MPC indicated that it would keep monitoring the initiated policy measures and act accordingly if the need arises.

This is also the first time the base lending rate announced by the Kenyan banking regulator has crossed the double-digit mark since January 2018.

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The commercial bank lending rate, according to CBK, has increased significantly from 12.4 per cent in the third quarter of 2022 to 12.7 per cent in January to current 13.1 per cent.

Dr Thugge revealed that credit advanced to the Kenyan private sector currently stands at 13.2 per cent and has remained steady for the past two months.

The move by CBK’s MPC is bound to hamper the advancement of loans to private businesses with commercial banks expected to adjust their lending rates according to the new policy.

The revision made by Dr Thugge came a week after he took office with the Monday June 26, 2023 meeting moving away from his predecessor Dr Patrick Njoroge’s bi-monthly cycle with the last meeting being held in May.

Here is the full statement by CBK: