The Central Bank of Kenya’s (CBK’s) Monetary Policy Committee (MPC) has reduced its base rate to 12.75 percent effective August, reducing the cost of taking credit from financial institutions.
In a meeting on Tuesday, MPC stated that the previous rate of 13 percent helped cool inflation and strengthen the Kenyan shilling against major global currencies, such as the US dollar.
Since CBK increased its lending rate, inflation has dropped significantly.
Further, it revealed that the latest figure from the Kenya National Bureau of Statistics shows that the inflation rate dropped to 4.3 percent in July from a high of 8.1 percent in October last year.
Similarly, the Kenya shilling has gained value against its American unit to about Kes 129 per greenback from a low of Kes 160 versus one dollar.
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“The MPC noted that its previous measures have lowered overall inflation to below the mid-point of the target range, stabilized the exchange rate, and anchored inflationary expectations.”
“The Committee further noted that NFNF inflation has moderated, while central banks in some major economies have lowered interest rates in response to easing inflationary pressures, with indicationsthat other central banks will soon embark on a similar trajectory,” MPCsaid
Nevertheless, the Committee stated that it still has room to adjust the base rate whilst ensuring continued stability of the exchange rate.
