The Central Bank of Kenya (CBK) has reduced the policy lending rate, cutting the base lending rate by 25 basis points, and lowering it from 13 percent to 12.75 percent.
This decision came in response to a drop in inflation to manageable levels, strong economic growth, and improved global macroeconomic conditions. The rate reduction is expected to provide relief to Kenyans seeking more affordable bank loans.
In its Monetary Policy Committee (MPC) meeting on August 6, the CBK noted that Non-Food Non-Fuel (NFNF) inflation has moderated. Additionally, central banks in major economies have also lowered interest rates due to easing inflationary pressures, with other central banks expected to follow a similar path.
“The MPC concluded that there was room for a gradual easing of the monetary policy stance while maintaining exchange rate stability. Consequently, the Committee decided to lower the Central Bank Rate (CBR) to 12.75 percent,” CBK stated.
The rate reduction is expected to decrease the cost of loans for domestic borrowers, many of whom have struggled to repay their loans since the CBK began increasing rates in June 2022.
The CBR, as the base for all monetary policy operations, aims to provide clarity and certainty in policy implementation.
The MPC highlighted that previous measures have successfully reduced overall inflation to below the midpoint of the target range, stabilized the exchange rate, and anchored inflationary expectations. Kenya’s overall inflation fell to 4.3 percent in July 2024, down from 4.6 percent in June.
