In a move to provide relief to borrowers amidst challenging economic times, the Central Bank of Kenya (CBK) has cut its benchmark interest rate by 0.75 percent, the largest decrease since the onset of Covid-19 in March 2020. The rate now stands at 12 percent, following a significant drop in inflation to its lowest level in over a decade.
This reduction is expected to lower the cost of loans for households and businesses, stimulating demand for credit and revitalizing economic activity. With inflation at a manageable 3.6 percent, the CBK sees an opportunity to support growth through accessible credit.
Analysts anticipate a positive impact on consumer spending and business investments, driving economic expansion. Additionally, lower borrowing costs may help banks address the rising trend of non-performing loans.
The move aligns with global trends, as other central banks like the US Federal Reserve have also cut rates to counter economic challenges. Looking ahead, experts project further rate cuts in 2025 to sustain the momentum of recovery and bolster lending rates for the private sector.
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