Central Bank of Kenya’s Monetary Policy Committee has decided to raise the benchmark lending rate from 8.5 per cent to 10 per cent, the first increase since 2011.

The decision, made at a meeting of the MPC called a month earlier than scheduled, is meant to address inflation fears and shore up the battered Kenya shilling better than the CBK’s interventions in the market.

A statement signed by MPC vice-chairman Haron Sirima said the rapid depreciation of the shilling’s exchange rate had been curtailed by the “tightening bias” stance adopted by the policy body and implemented by CBK through its monetary operations.

However, he added, rising forex demand, volatility in global markets and an expected rise in international oil prices “have implications on inflationary expectations”.

He also noted the potential of consumer price inflation as importers pass-through past exchange rate movements.

“The MPC, therefore, decided to augment its tightening stance by raising the CBR by 150 basis points from 8.50 per cent to 10 per cent,” he said.

The Central Bank Rate is a significant component in the Kenya Banks Reference Rate used to determine interest rates for loans offered by commercial banks.