DAR ES SALAAM - Tanzania's central bank raised its key interest rate on Thursday to stay ahead of lingering inflationary pressure from global economic developments despite satisfactory local conditions, its governor said.

The bank raised its key rate to 6.0% on Thursday from 5.5%.

The Bank of Tanzania had announced a rate of 5.5% in January after announcing earlier that month it would start using a benchmark interest rate to signal its monetary policy direction.

"The decision ... is based on the macroeconomic forecast made in March ... which requires an increase in the scope of monetary policy actions to contain the lingering inflationary pressures," Governor Emmanuel Tutuba said at a meeting with chief executives of the country's banks in Dar es Salaam.

Inflation in the East African nation was steady at 3% year on year in February, unchanged from a month earlier, staying below the government's target of not more than 5%.

"The stability was due to prudent monetary policy and adequate domestic food supply," Tutuba said.

He said the outlook for the economy which is estimated to have grown about 5% in 2023 from 4.7% a year earlier, was bullish and was estimated to have expanded by about 5.1% in the first quarter of 2024.

"The performance is underpinned by public investment, particularly in infrastructure, as part of the measures to facilitate private sector business and investment," Tutuba said.

"Private sector investment also contributed to the estimated growth, because of the improving business environment in the country."

Tanzania's economy relies on among others, tourism, mining and agriculture.

(Reporting by Nuzulack Dausen, writing by George Obulutsa; Editing by Jason Neely and Emelia Sithole-Matarise)