CBK lowers benchmark lending rate from 12.75% to 12%
The Central Bank of Kenya slashed its
benchmark lending rate to 12.00% from 12.75% on Tuesday, in a move aimed
at stimulating credit to the private sector, the bank's Monetary Policy Committee
(MPC) said in a statement.
The cut follows a 25 basis-point reduction in
August, the first in approximately four years. The bank also trimmed its
economic growth forecast for 2024, citing a slowdown in the second quarter.
"The MPC 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," the bank said in a statement.
Last week, Treasury Cabinet Secretary John Mbadi said the central bank should start lowering its lending rate due to falling inflation in recent months.
Inflation fell to 3.6% year-on-year in
September from 4.4% a month earlier. It stood at 4.3% in July, well within the
government's preferred band of 2.5%-7.5%.
Prior to the rate decision, Kenya Bankers'
Association said in a research note on Oct. 3 that there was room for the bank
"to effect a decisive policy rate cut" to support stronger economic
growth by pushing for a recovery in growth of private sector credit.
The bank cut its growth forecast for 2024 to
5.1% from 5.4% following slower growth in the second quarter, which came in at
4.6% year-on-year from 5.6% in the same quarter a year earlier. But it expects
the economy to grow 5.5% in 2025.
"The resilience of key service sectors,
robust performance in agriculture and improved exports are expected to continue
supporting growth," it said.
Kenya's shilling currency is up more than 21%
against the dollar this year, after a rally that started in February when the
government sold a new $1.5 billion Eurobond to buy back most of a $2 billion
bond whose maturity in June had shaken investors.
The central bank said it had adequate foreign
exchange reserves, at $8.25 billion, to buffer against any short-term shocks in
the foreign exchange market.
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