The Monetary Policy Committee of Kenya's central bank was forced to hold an off-cycle meeting after inflation rose unexpectedly in May, the governor of the bank, Kamau Thugge, said on Tuesday.
Policymakers raised the benchmark lending rate by 100 basis points to 10.50%, the highest level since 2016, during their meeting on Monday, which was held a month early.
Year-on-year inflation (KECPI=ECI) rose to 8% last month from 7.9% previous month, defying expectations of a decline, and staying outside the government's preferred range of 2.5%-7.5%.
But the rate is likely to start falling in August after a bump in July that will be driven by higher taxes on fuel, Thugge said.
The yields on government securities, which have surged to more than 14% in recent auctions, are expected to stabilize in the course of the financial year starting next month, he said.
He attributed the forecast to projected higher revenue collection, government expenditure cuts and lower planned borrowing.
Policymakers raised the benchmark lending rate by 100 basis points to 10.50%, the highest level since 2016, during their meeting on Monday, which was held a month early.
Year-on-year inflation (KECPI=ECI) rose to 8% last month from 7.9% previous month, defying expectations of a decline, and staying outside the government's preferred range of 2.5%-7.5%.
But the rate is likely to start falling in August after a bump in July that will be driven by higher taxes on fuel, Thugge said.
The yields on government securities, which have surged to more than 14% in recent auctions, are expected to stabilize in the course of the financial year starting next month, he said.
He attributed the forecast to projected higher revenue collection, government expenditure cuts and lower planned borrowing.