The Central Bank of Kenya has reduced its benchmark lending rate to 10.75%, aiming to boost economic growth amidst a slowdown in inflation. This marks the fourth rate cut, aligning with a positive global economic outlook and new inflation measures introduced in January 2025.
The Central Bank of Kenya (CBK) has reduced its benchmark lending rate by 50 basis points, bringing it down to 10.75%. This decision was announced by the monetary policy committee chaired by Governor Kamau Thugge. It marks the fourth reduction in the rate, aimed at stimulating economic growth and in response to a deceleration in inflation rates.
The decision was influenced by an improving global economic landscape, expected to grow from 3.2% in 2024 to 3.3% in 2025. The committee’s recent measures coincide with new inflation metrics introduced by the Kenya National Bureau of Statistics and CBK in January 2025, which aligns with standardized Consumer Price Index methodology.
In January 2025, Kenya’s overall inflation was reported at 3.3%, with core inflation slightly dropping from 2.2% to 2.0% compared to December 2024. This decline in inflation is primarily attributed to decreased prices of processed food items. In contrast, non-core inflation saw an uptick due to increased prices of food crops.
As a result of these trends, the authorities anticipate that overall inflation will remain below the midpoint of their target range. This expectation is backed by persistently low core inflation rates and projected reductions in energy costs.
The Central Bank of Kenya’s decision to lower the lending rate is part of a broader strategy to stimulate economic activity amid moderating inflation and global recovery. The bank aims to create an environment conducive to borrowing and investment, essential for supporting growth after an economic slowdown. The adoption of core and non-core inflation metrics enhances their ability to monitor and respond to economic conditions more effectively.
The Central Bank of Kenya has strategically cut its lending rate to foster economic growth amidst a government push for stabilization following inflationary trends. As the global economic outlook appears to improve, the authorities focus on maintaining a tight control on inflation, especially through the adoption of better measurement practices and close monitoring of price changes in essential sectors.
Original Source: dmarketforces.com
