The combination of rising demand for debt and the uptick in inflation-which jumped to 5.4% year on year in January 2011, the highest since the CPI was revamped a year ago, owing to food and fuel pressures-is putting upward pressure on key interest rates. The benchmark 91-day T-bill rate edged up in January for the sixth consecutive month to about 2.5%, while the 364-day T-bill rate rose to 3.7%. Bond rates have shown a similar trend, with the 15-year rate rising by 100 basis points to 10.9% in December, and the five-year rate rising by 90 basis points to 7.6% in January. The slow retreat in lending rates-which fell from 15% in early 2010 to 13.9% in October-has now stalled and may go into reverse, threatening higher debt costs for businesses and households. The latest data show that private-sector credit extension continues to grow fairly briskly, rising by 21.5% year on year in October-but this is dwarfed by growth in credit extended to the government, which leapt by 45% during the same period. The CBK in January reacted to rising prices and interest rates by cutting the central bank rate (CBR) by 25 basis points to 5.75%, the lowest since the CBR was introduced in 2006, in a bid to reverse rate trends and cut borrowing costs. The change is a small one and may not have much impact (as the CBR is not the primary benchmark) but was nevertheless surprising as looser money is very risky at present because of the inflationary threat.