CBK Cuts Interest Rate to 12% Amid Slowing Growth: What This Means for Borrowers
The Central Bank of Kenya (CBK) has slashed its benchmark lending rate from 12.75% to 12%, signaling a move to revitalize the economy by making loans more affordable. This decision follows a steady decline in inflation, which dropped to 3.6% in September 2024, aided by falling food and fuel prices.
The Monetary Policy Committee (MPC) justified the cut by citing sluggish economic growth, with Kenya’s GDP expanding by just 4.6% in the second quarter of 2024, down from 5.6% in the same period last year. The reduction is expected to ease the cost of borrowing, encouraging businesses and consumers to take up loans and stimulate economic activity.
The CBK’s move comes in response to a slowdown in credit growth to the private sector, which had been stifled by high borrowing costs. With lower rates, businesses—particularly small and medium enterprises—may find it easier to access financing, which could lead to a revitalized economic landscape.
The CBK also noted that inflation is projected to stay low due to improved agricultural output and stable global fuel prices, creating room for further monetary easing if necessary. This adjustment may trigger banks to reduce their loan interest rates, offering much-needed relief to both businesses and individual borrowers.
As Kenya grapples with subdued consumer demand and elevated costs of doing business, this rate cut is seen as a timely intervention to boost economic activity and support recovery in various sectors.
