Kenya’s central bank lowered its benchmark lending rate to 10.75% and reduced the Cash Reserve Ratio for banks to 3.25%, both aimed at encouraging lending and economic growth. This policy change aligns with economic forecasts predicting a need for easier monetary conditions.
On February 5, 2025, the Central Bank of Kenya announced a reduction in its benchmark lending rate from 11.25% to 10.75%, a cut of 50 basis points. This decision was anticipated by a Reuters survey of four economists, indicating a consensus on the need to adjust monetary policy in response to economic conditions. In addition, the bank lowered the Cash Reserve Ratio for commercial banks by 100 basis points to 3.25% to facilitate lower lending rates.
The monetary policy decision made by the Central Bank of Kenya is critical in influencing overall lending rates across the economy. Reducing the benchmark lending rate is aimed at stimulating economic activity by making borrowing cheaper for consumers and businesses. The Cash Reserve Ratio impacts the amount of funds banks have available to lend, which is crucial during times of economic fluctuation.
The Central Bank of Kenya’s decision to cut the lending rate to 10.75% and reduce the Cash Reserve Ratio is indicative of an overarching strategy to promote economic stability and growth. These measures aim to enhance liquidity in the banking sector, therefore encouraging lending and investment in various sectors of the economy, supporting recovery from past economic challenges.
Original Source: www.cnbcafrica.com
