CBK Slashes Lending Rate to 12%: Kenyans Set to Access Cheaper Loans Amid Inflation Drop
Kenyans could soon benefit from more affordable loans following the Central Bank of Kenya’s (CBK) decision to reduce the base lending rate for the second month in a row.
In a recent announcement, CBK slashed the rate by 75 basis points, bringing it down to 12.00% from the previous 12.75% set in August. This policy shift is anticipated to lower interest rates for both personal and commercial loans, offering relief to borrowers.
The rate cut was driven by a significant decline in the country’s inflation, which dropped to 3.6% from 4.4% in August 2024. This reduction in inflation is largely due to a favorable business climate that has made goods and services more affordable for Kenyans.
Additionally, food inflation decreased to 5.1% in September, down from 5.3% in August. The lower inflation in food prices is largely attributed to a drop in the costs of essential vegetables like tomatoes, cabbages, onions, and potatoes.
“The MPC observed that overall inflation has continued to fall and is projected to remain below the target range in the near term, bolstered by stable food prices due to an increase in supply from ongoing harvests,” CBK stated.
The Central Bank further emphasized that there was room for a more lenient monetary policy to encourage economic growth, while also maintaining exchange rate stability. As a result, the Committee decided to lower the Central Bank Rate (CBR) to 12.00%.
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CBK also projected that inflation would stay below the target range, thanks to a better food supply, a steady exchange rate, and stable fuel prices.
The decision to cut rates was also influenced by the strength of the Kenyan Shilling, which hit a record high this year, appreciating by about 21% against major global currencies. On October 8, the London Stock Exchange Group (LSEG) quoted the shilling at Ksh128.5 to the US Dollar.
Furthermore, diaspora remittances grew by 12.7%, totaling $4.6 billion in the 12 months leading up to August 2024, compared to $4.12 billion in the same period in 2023. Remittances were also up 16.4% in the first eight months of 2024 compared to the same timeframe in 2023.
Despite these positive developments, the ratio of Non-Performing Loans (NPLs) rose to 16.7% in August 2024 from 16.3% in June, with the most significant increases seen in the transport and communication, personal and household, trade, real estate, and manufacturing sectors.
“The MPC will keep a close eye on how these policies affect both the global and domestic economy and is prepared to take additional measures if necessary,” the Central Bank concluded.
CBK Slashes Lending Rate to 12%: Kenyans Set to Access Cheaper Loans Amid Inflation Drop
