The Central Bank of Kenya (CBK) has announced that it’s lowering the benchmark interest rate by 0.75% to 12% following the October Monetary Policy Committee Meeting.
The decision to lower the interest rate was driven by the easing of food inflation, attributed to a stable exchange rate, lower fuel inflation, and strong performance of agriculture.
Kenya’s inflation continued the downtrend to the mid-point of CBK’s target range of 2.5% and 7.5% in September, falling to 3.6% from 4.4% in August. Food inflation in September stood at 5.1% compared to 5.3% in August.
MPC noted that non-food, non-fuel inflation has stabilized and is projected to remain stable.
“Additionally, the Committee noted that non-food non-fuel inflation has moderated and is expected to remain stable, while central banks in the major economies have continued to lower interest rates in response to easing inflationary pressures, with expectations of further reductions in the coming months,” the MPC noted.
The MPC also noted that there was scope for easing the monetary policy to support economic activity following the sharp decline in credit to the private sector and the slowdown in growth in the second quarter of 2024.
The development comes as the latest GDP data for the second quarter of 2024 indicated a slowdown in the Kenyan economy. According to data released by the Kenya National Bureau of Statistics, the country’s GDP grew by 4.6% in the Q2 of 2024 compared to 5.6% in the same period last year.
The slowdown was mainly driven by the deceleration in growth in the mining, quarrying, and construction sectors.
Furthermore, the MPC said it would closely monitor development in the domestic and global economy and the impact of the policy measures and take necessary actions in alignment with its mandate. The next MPC meeting is scheduled for December 2024.
