Kenya's central bank cuts CBR by 75 basis points to 11.25% in third 2024 reduction

The Central Bank of Kenya (CBK) cut its Central Bank Rate (CBR) by 75 basis points to 11.25% from 12.00% on 5 December 2024, its third reduction since it began lowering rates in August, when it eased policy for the first time in four years.

Overall inflation stood at 2.8% in November 2024, up slightly from 2.7% in October but well below the midpoint of the CBK's target range of 5% plus or minus 2.5 percentage points. Non-food, non-fuel inflation eased to 3.2% from 3.3%, while food inflation rose to 4.5% from 4.3%, driven by higher cooking oil prices. Fuel inflation was -1.6%, compared with -1.7% in October.

MPC RATIONALE

The Monetary Policy Committee pointed to easing global inflation and the expectation that major central banks would continue to lower interest rates gradually. Domestically, it noted that economic growth had slowed in the first half of 2024 and said a lower rate would support economic activity, with inflation low and the exchange rate stable.

The committee, chaired by CBK Governor Kamau Thugge, observed that short-term rates on government securities had declined in line with the CBR, but that banks had not lowered their lending rates proportionately. The committee urged banks to reduce lending rates to support private sector credit and economic activity.

The committee said it would closely monitor the impact of its policy measures and stood ready to take further action as necessary. The meeting was the first for four new MPC members: Isis Nyong'o, Kemboi Kipruto, Freshia Mugo and Jared Osoro. The committee's next meeting was scheduled for February 2025.