The Central Bank of Kenya (CBK) has cut its benchmark lending rate to 10%, the lowest since May 2023, in a move aimed at reducing borrowing costs and boosting economic activity. This marks the fourth consecutive rate cut by the Monetary Policy Committee (MPC) as inflation eases and the government seeks to support businesses and househol
The reduction from the previous rate of 10.5% signals the CBK’s confidence in stabilizing inflation, which has remained within the target range of 2.5% to 7.5%. Lower interest rates mean cheaper loans for businesses and individuals, potentially spurring investment, consumer spending, and economic growth. Commercial banks are expected to adjust their lending rates accordingly, offering relief to borrowers struggling with high financing costs
Kenya’s inflation has shown signs of moderation, dropping to 5.1% in May 2024 from a peak of 9.2% in 2023, driven by lower food and fuel prices. The CBK’s decision reflects a shift towards stimulating economic recovery after a prolonged period of tight monetary policy aimed at curbing inflation. Analysts suggest that the rate cuts could support key sectors like manufacturing, agriculture, and real estate by improving access to credit.
While the rate cut is expected to boost economic activity, some risks remain. A weaker-than-expected Kenyan shilling and global economic uncertainties could pose challenges. Additionally, banks may be cautious in passing on the full benefits of lower rates to customers.
Economists project that if inflation remains stable, further rate cuts could follow later in the year. The move aligns with the government’s efforts to revive economic growth, which has been sluggish due to high debt burdens and reduced consumer spending
The CBK’s latest rate cut underscores its commitment to fostering economic recovery. By lowering borrowing costs, the central bank aims to encourage investment and spending, providing much-needed relief to businesses and households. However, sustained growth will depend on fiscal discipline, stable inflation, and favorable global economic conditions.
