What interest rate hike in U.S means for Kenya as MPC prepares to meet – CBK Governor Njoroge explains

African countries including Kenya are experiencing serious levels of economic distress to maintain relationship in the financial markets like borrowing on manageable terms as policy makers in the developed economies resolve to rapidly raise interest rates.

According to the Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge, the rate hikes in the case of the United States, will burn out the emerging economies.

He acknowledged the fact that the rate hikes are already freezing out Kenya’s ability to obtain access to capital markets.

“Policy makers in developed economies to raise interest rates have implications on financial markets. Right now financial markets have frozen us out and it is difficult for us to maintain our relationships in the financial markets,” said Dr. Njoroge who spoke to Bloomberg’s reporter Jeniffer Zabasajja on Wednesday.

US’ interest rate surged to 14-year all-time high when the Federal Reserve adjusted it by three quarters to a percentage point (0.75 percent) to 3.25 percent Wednesday.

The rate hike comes against the backdrop of looming inflation fears in the world’s largest economy which according the Federal Reserve chairman Jerome Powell, must be dealt with.

“We have got to get inflation behind us,” he said. “I wish there were a painless way to do that. There isn’t.”

As Kenya’s Monetary Policy Committee prepares to meet in the coming week, Dr. Njoroge hinted at slamming brakes on Kenya’s rising inflation which hit 8.5 percent historic high last month.

“Monieary policy will remain geared towards price stability –  the point is inflation has surged ,” added Njoroge.

Banks in nearly every country – with the big exceptions of Japan and China – are facing similar trade-offs as they raise rates to combat their own inflation problems.

Lawrence Baraza

Lawrence Baraza is a prolific writer with competencies in Digital Media, Print, and Broadcast. Baraza is also a Communication Practitioner currently spearheading Digital content on Metropol TV's Digital Desk.

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