Kenya's central bank raises key lending rate to 8.75pc

Kenya's central bank raised its benchmark lending rate by half a point to 8.75%, saying there was scope for more tightening due to sustained inflation and other risks.

Like their counterparts around the world, African policymakers have had to raise lending rates this year to battle spiraling inflationary pressures.

The Monetary Policy Committee of Kenya's central bank cited "sustained inflationary pressures, the elevated global risks and their potential impact on the domestic economy," for its decision to tighten rates further.

It raised the rate for the first time since 2015 during their meeting in May, when they increased it by 50 basis points, followed by a 75 basis points hike in September.

A Reuters poll of seven analysts had predicted Wednesday's hike, with six participants forecasting an increment and one expecting a "hold" decision.

The central bank's outlook for the current account deficit for this year has improved to 5.6% of GDP, the

MPC said in its statement, from an earlier forecast of 5.9%.

It attributed the change to higher export earnings and resilience in the amounts of hard cash sent home by Kenyans living abroad.

The foreign exchange reserves held by the central bank offered 3.94 months worth of import cover, the committee said.

It did not comment on the fact that reserves have inched under the statutory requirement of four months worth of import cover, or say the level they were at before.