Kenya’s central bank cut its main lending rate once again on Tuesday. The benchmark rate was lowered to 8.75% from 9.00%. This is the 10th consecutive rate cut. The move is aimed at encouraging banks to lend more to businesses and households.
The decision was announced after a meeting of the Monetary Policy Committee. The central bank said it wants to strengthen the impact of earlier steps taken to improve credit growth.
Why Kenya central bank cut interest rates again
The central bank believes lending in the private sector still needs support. Lower interest rates make borrowing cheaper. This helps businesses invest and expand. It also helps consumers spend more.
Most economists expected the cut. In a poll, 5 out of 6 economists predicted a reduction. Only 1 thought rates would stay unchanged. However, Kenya’s bankers had asked the central bank to pause. They wanted more time for earlier cuts to work through the economy.
Despite this, policymakers decided more support was needed.
Inflation trend supports rate cut decision
Inflation in Kenya has cooled slightly. Prices rose 4.4% year on year in January. This was lower than 4.5% in December. Inflation remains well within the central bank’s preferred range of 2.5% to 7.5%.
With price pressures under control, the central bank has room to cut rates. Stable inflation reduces the risk of overheating the economy.
Kenya economic outlook and risks ahead
Kenya’s economy has been growing at a steady pace. Growth has been around 5% per year. This makes it the largest and one of the strongest economies in East Africa.
However, risks remain. The national weather service has warned of a possible drought. This could affect agriculture and food prices in the coming months.
For now, the central bank is focused on supporting growth. By cutting rates again, it hopes to keep credit flowing and protect the economy from future shocks.
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