The Central Bank of Kenya (CBK) has lowered its lending rate from 12 per cent to 11.25 per cent.
In lowering the rate, the Monetary Policy Committee (MPC) stated that generally, global inflation has declined and central banks in the major economies are expected to gradually continue lowering interest rates.
“Kenya’s overall inflation remained broadly unchanged at 2.8 per cent in November 2024 compared to 2.7 per cent in October, thereby remaining well below the midpoint of the target range of 5±2.5 per cent,” the committee that was chaired by CBK Governor Kamau Thugge stated.
Between December 2023 and December 2024, the CBK lending rate has fallen from 12.50 per cent to the current 11.25 per cent, reflecting a drop of 0.75 points.
Section 36 (4) of the Central Bank of Kenya Act stipulates that the Central Bank shall publish the lowest rate of interest it charges on loans to banks and that rate shall be known as the Central Bank Rate (CBR).
The level of the CBR is reviewed and announced by the Monetary Policy Committee (MPC) at least every two months and its movements, both in direction and magnitude, signals the monetary policy stance.
The CBR is the base for all monetary policy operations in order to enhance clarity and certainty in monetary policy implementation.
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Whenever the Central Bank is injecting liquidity through a Reverse Repo, the CBR is the lowest acceptable rate. Likewise whenever the Bank wishes to withdraw liquidity through a Vertical Repo, the CBR is the highest rate that the CBK will pay on any bid received. Changes in the CBR reflect the monetary policy stance that the Bank is pursuing.
