The Central Bank of Kenya (CBK) has reduced the Central Bank Rate (CBR) from 12 percent to 11.25 percent.
In a statement on Thursday, December 5, CBK disclosed that the Monetary Policy Committee (MPC) made the decision to lower the interest rate due to a stable inflation rate and exchange rate stability.
"Kenya’s overall inflation remained broadly unchanged at 2.8 percent in November 2024 compared to 2.7 percent in October, thereby remaining well below the mid-point of the target range of 5±2.5 percent.
"Overall inflation is expected to remain below the mid-point of the target range in the near term, supported by lower food inflation owing to improved supply from the ongoing harvests and favourable weather conditions, lower fuel prices, and a stable exchange rate," CBK Governor Kamau Thugge remarked.
Thugge further noted that central banks in major economies across the world have lowered their interest rates further, with a gradual pace of reductions expected in the coming months.
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"MPC noted that the non-food non-fuel (NFNF) inflation has moderated and is expected to remain stable while central banks in major economies have lowered their interest rates further, with expectations of a gradual pace of reductions in the coming months. MPC further noted that economic growth in the first half of 2024 had decelerated and therefore concluded that there was a scope for further easing of the monetary policy stance to support economic activity," he explained.
Meanwhile, the CBK boss observed that short-term rates on government securities had declined sharply in line with the CBR, but banks had not responded by lowering their rates.
Thugge urged the banks to take necessary steps to lower their rates in order to stimulate credit to the private sector.
"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," Thugge explained.
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