The Central Bank of Kenya (CBK) has announced a 75 basis point cut in the policy rate, bringing it down to 11.25%.
This move aims to stimulate economic growth and address persistent low demand and credit market distress.
“The Committee observed that short-term rates on government securities had declined sharply in line with the CBR, but that banks had not responded by lowering their rates proportionately. The MPC, therefore, urges the banks to take necessary steps to lower their lending rates, in order to stimulate credit to the private sector, and thereby stimulate more economic activity.”
While the economy grew by 4.8% in the first half of 2024, a slowdown compared to the previous year, the CBK remains optimistic about the country’s economic outlook. The bank forecasts GDP growth of 5.1% for 2024 and 5.5% for 2025.
Despite the rate cut, challenges such as unresolved government pending bills and structural bottlenecks in the industrial sector could hinder economic recovery.
While the US Federal Reserve’s monetary policy stance could impact Kenya’s economy, the CBK’s proactive measures, including potential open market operations, can help support growth and stability.
