NAIROBI, Kenya- Kenyan consumers are set to benefit from lower borrowing costs after the Central Bank of Kenya (CBK) slashed interest rates by 75 basis points in its latest review.
In a move aimed at stimulating economic activity, the Monetary Policy Committee (MPC) on Tuesday lowered the lending rate from 12.75pc to 12pc, marking the second consecutive rate cut this year.
The decision to ease monetary policy comes on the back of a significant decline in inflation.
According to CBK Governor Dr. Kamau Thugge, the easing of inflationary pressures is largely due to improved food supply from ongoing harvests, a stable exchange rate, and lower fuel costs.
“The MPC noted that overall inflation has declined further and is expected to remain below the midpoint of the target range in the near term,” Thugge said, highlighting that food inflation has stabilized, giving room for a more accommodative policy stance.
Kenya’s annual inflation rate dipped to 3.6pc in September, down from 4.4pc in August, a development the central bank considers favorable as it falls well below the mid-point of the target range.
With inflation under control, the CBK is now turning its attention to reigniting economic activity, which has slowed in recent months.
The MPC pointed out that credit uptake in the private sector has sharply decelerated, signaling a need for looser monetary policy to encourage lending.
“The sharp deceleration in credit to the private sector and the slowdown in growth in the second quarter of 2024 provided further scope for easing the monetary policy stance,” Dr. Thugge explained.
The latest rate reduction should make borrowing cheaper for businesses and consumers, offering a much-needed boost to the economy .
As the Kenyan economy navigates a period of low inflation and tepid credit growth, the CBK is keeping a close eye on economic indicators.
The next MPC meeting is scheduled for December 2024, where further adjustments could be on the table depending on how the economic landscape evolves.
