Kenya Unexpectedly Raises Key Rate to 11.5% as Currency Slumps

The Central Bank of Kenya unexpectedly raised its benchmark interest rate for a second consecutive month to help curb inflation after the currency slumped to a three-year low.

The Monetary Policy Committee, in its first meeting chaired by Governor Patrick Njoroge, increased the rate to 11.5 percent from 10 percent, the Nairobi-based regulator said in an e-mailed statement on Tuesday. Only three of the 16 economists surveyed by Bloomberg predicted a higher rate, with the rest forecasting it would be left unchanged.

The shilling has dropped 9.9 percent against the dollar this year and breached 100 to the dollar on Monday as a collapse in tourism and falling tea output reduces revenue from the nation’s two biggest foreign-currency earners.

The MPC “noted elevated risks to the inflation outlook mainly attributed to pressures on the exchange rate over the last few months,” it said in the statement.

Njoroge, 53, took over from Njuguna Ndung’u as governor last month pledging to bring inflation down. The central bank raised the benchmark rate by 150 basis points in June, the first increase since 2011.

The bank also introduced a three-day repurchase rate to help improve liquidity management. The Kenya Banks’ Reference Rate, which commercial banks use to price loans, was raised to 9.87 percent from 8.54 percent.