The Central Bank of Kenya (CBK) has announced a reduction in the Central Bank Rate (CBR) from 12 percent to 11.25 percent.
In a statement released on Thursday, December 5, CBK explained that the decision by the Monetary Policy Committee (MPC) to lower the interest rate was driven by stable inflation and a stable exchange rate.
“Kenya’s overall inflation remained nearly unchanged at 2.8 percent in November 2024, compared to 2.7 percent in October, staying well below the midpoint of the target range of 5±2.5 percent,” said CBK Governor Kamau Thugge. “Inflation is expected to remain under the target midpoint in the near term, supported by lower food inflation due to improved supply from ongoing harvests, favorable weather conditions, lower fuel prices, and a stable exchange rate.”
Governor Thugge also pointed out that central banks in major economies have continued to reduce their interest rates, with expectations for a gradual pace of cuts in the coming months.
“The MPC noted a moderation in non-food, non-fuel (NFNF) inflation, which is expected to remain stable. With central banks globally easing rates and economic growth in the first half of 2024 slowing, the MPC concluded that further easing of the monetary policy stance was appropriate to support economic activity,” Thugge added.
Additionally, the CBK Governor observed that while short-term rates on government securities had fallen in line with the CBR adjustment, banks had yet to lower their lending rates.
Thugge urged banks to respond by reducing their rates to encourage more credit to the private sector.
“The MPC will closely monitor the impact of these policy measures and global and domestic economic developments and is prepared to take further action if necessary in line with its mandate,” Thugge concluded.
