Relief For Kenyans Seeking Short-Term Loans Following CBK’s Successive Interest Rate Cuts
Kenyans will have access to cheaper loans for the next two months after the Central Bank of Kenya’s Monetary Policy Committee (MPC) reduced the base lending rate for the third time this year.
In its report on Thursday, December 5, the CBK cut the basic lending rate by 75 basis points, from 12 percent to 11.25 percent, pointing to lower interest rates from commercial banks.
Central Bank Governor Kamau Thugge credited the move to lower the basic lending rate on stable inflation, which is currently at 2.8%.
According to Thugge, gasoline inflation remained low in November, at -1.6%, compared to -1.7% in October.
He highlighted that it was primarily due to lower energy and pump prices, with non-food inflation falling to 3.2% in November from 3.3% in October.
“Overall inflation is expected to remain below the mid-point supported by lower food inflation owing to improved supply from the ongoing harvests, favourable weather conditions, and lower fuel prices,” the CBK governor stated.
Press Release – Monetary Policy Committee Meeting pic.twitter.com/AEMoRUdOaJ
— Central Bank of Kenya (@CBKKenya) December 5, 2024
The regulator also acknowledged that the stability of the Kenya shilling versus major currencies, notably the US dollar, influenced the committee’s decision to lower lending rates.
The local currency has gradually stabilised over the last 10 months, continuing its phenomenal run as the best-performing currency in 2024.
As of Thursday, December 5, commercial banks reported the shilling trading at Ksh129 against the greenback.
CBK also decreased interest rates due to a considerable increase in foreign exchange reserves, which now stand at $8,966 million, or 4.57 months of import cover.
According to the regulator, the large foreign exchange reserves have given ample cover and cushion against any short-term shocks in the foreign exchange market.
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Furthermore, the CBK governor stated that a recent survey done before the MPC meeting demonstrated continued confidence about company activity and economic growth forecasts over the coming year.
In addition, the number of non-performing plans decreased significantly between September and October.
Non-performing loans have decreased in the manufacturing, energy and water, financial services, and agriculture sectors.
“The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios. Banks have continued to make adequate provisions for the non-performing loans,” CBK noted in its report.
Relief For Kenyans Seeking Short-Term Loans Following CBK’s Successive Interest Rate Cuts
