The cost of borrowing has a 33-month high of 12.38 per cent in August according to new data from the Central Bank of Kenya (CBK).
The average commercial bank lending rate for the month matches to a high last seen in November 2019.
The rise in the cost of borrowing is primarily attributable to a rising domestic yield curve for government bonds along with a spike in Eurobond yields through the first eight months of 2022.
Additionally, high inflation both from a domestic and external standpoint has lifted general interest rates as investors and other market participants price in higher risks.
The average commercial lending rate has for instance moved up from 12.12 per cent in January this year.
CBK action to tighten monetary policy by lifting the benchmark interest rate for the first time in seven years at the end of May has also reflected on the new cost of commercial borrowing.
The cost of borrowing is set to edge up further into the end of 2022 with the CBK having once again lifted the benchmark interest rate to 8.25 per cent at the end of September.
Other commercial bank rates have risen in tandem with borrowing costs to mirror the general rise in interest rates.
For instance, the savings rate has hit 3.46 per cent in August from 2.94 per cent in July while the deposit rate (return on fixed deposit accounts) has hit 6.93 per cent in the same period from 6.74 per cent in July.
Yields on government securities have also followed the same trajectory with the 91 day Treasury bill for instance returning an interest rate of 9.036 per cent at the start of October from an average 8.21 per cent in July.