The Central Bank of Kenya’s monetary policy committee, in its latest move, cut the benchmark interest rate by 0.75% or 75 basis points on Tuesday.
This according to a report by the East African is the largest margin the interest rate has been cut by since the Covid-19 pandemic in 2020.
Following the impressive decline in inflation in September, the lowest in a decade, the interest rate was cut from 12.75 basis points, to 12.
“The MPC also noted the sharp deceleration in credit to the private sector, and the slowdown in growth in the second quarter of 2024, and concluded that there was scope for a further easing of the monetary policy stance to support economic activity, while ensuring exchange rate stability,” noted the MPC in a statement.
The interest rate cut is expected to spur a drop in loan costs for consumers and businesses, which have struggled to pay their debts since the central bank began raising interest rates in 2022.
“The MPC noted that overall inflation had declined further and is expected to remain below the mid-point target range in the near-term, supported by staple food inflation attributable to improved supply from the ongoing harvests, a staple exchange rate, and lower fuel inflation,” the Central Bank stated.
A statement issued from Nairobi states that consumer prices rose 3.6% in September compared to the same month last year, the lowest figure since December 2012.
The rate of inflation decreased from 4.4% in August to a value that was less than the median forecast of four analysts in a Bloomberg survey, which was 4.3%. Prices increased by 0.2% per month.
Additionally, the interest rate cut could assist banks in managing the increasing volume of non-performing loans that have risen as a result of costly credit and the weak national economy.
