The Central Bank of Kenya (CBK) has reduced its official lending rate

NAIROBI, Kenya, Feb 5 – The Central Bank of Kenya (CBK) has lowered its benchmark lending rate by 50 basis points to 10.75 percent, a strategic move aimed at stimulating economic activity.

The decision, made by the Monetary Policy Committee (MPC), is based on expectations that inflation will remain stable in the near term. This projection is supported by factors such as controlled core inflation, reduced energy costs, and a stable exchange rate.

MPC Chair Kamau Thugge noted that global central banks have also been adjusting interest rates at varying paces, reflecting broader economic trends.

“The decision takes into account the need to support economic activity while maintaining exchange rate stability,” Thugge stated. He added that economic growth had slowed in 2024, creating an opportunity for monetary policy adjustments to foster recovery.

In a complementary move, the CBK has also reduced the Cash Reserve Ratio (CRR) by 100 basis points from 4.25 percent to 3.25 percent. This measure is expected to enhance liquidity in the banking sector, allowing commercial banks to offer more affordable credit to businesses and individuals.

Additionally, CBK has intensified its oversight on commercial banks to ensure compliance with the Risk-Based Credit Pricing Model (RBCPM), which is designed to align interest rates with borrowers’ risk profiles. On-site inspections have commenced to guarantee banks pass on the benefits of lower lending costs to consumers.

“Following recent amendments to the Banking Act, banks that fail to adjust their lending rates in line with reduced funding costs will face penalties,” the CBK statement emphasized.

The latest policy adjustments are part of broader efforts to sustain economic momentum while ensuring financial sector stability. Analysts anticipate that the rate cut and liquidity measures will encourage borrowing, spur investments, and support overall economic growth in 2024.