The Central Bank of Kenya on Thursday continued the course of rate cuts, trimming its benchmark interest rate by 0.75% from 12% to 11.25%.
The easing inflation, stable exchange rate, and deceleration of economic growth in the first half of 2024 drove the Monetary Policy Committee’s decision to lower the Central Bank Rate.
The MPC noted that the dovish monetary policy stance supports economic activity and promotes exchange rate stability. The overall performance of the Kenyan economy decelerated in the first half of this year, with real Gross Domestic Production (GDP) growth averaging 5.5% compared to 5.5% for the same period last year.
Moreover, Kenya’s inflation has fallen steadily below the midpoint of the CBK’s target range of 2.5% – 7.5%, with the latest statistics by the Kenya National Bureau of Statistics (KNBS) showing a 2.8% inflation.
The apex bank started its campaign of rate cuts this year with a 0.25% rate cut followed by a 75 basis points rate cut in October. Despite the fall in interest rates, commercial banks are yet to lower their lending rates.
Therefore, the MPC urged banks to take necessary steps to cut their lending rates proportionately “ in order to stimulate credit to the private sector and thereby stimulate more economic activity,” according to the statement by CBK.
The Committee left the future decisions on monetary policy open-ended, reiterating that economic data would inform future decisions.
“The MPC will closely monitor the impact of the policy measures as well as developments in the global and domestic economy and stands ready to take further action as necessary in line with its mandate,” CBK noted
Read more: Central Bank Lowers Interest Rate to 12%
