This archive report was first published on 25 November 2019.
On November 25, 2019, the Central Bank of Kenya (CBK) made a significant move by reducing the Central Bank Rate (CBR) to 8.50 percent, marking the first time in 17 months.
This decision was made against a backdrop of domestic macroeconomic stability and the repeal of the interest rate cap, which has been a contentious issue in Kenya's financial sector.
According to the Monetary Policy Committee (MPC), inflation remained within the target in September and October 2019, with month-on-month inflation rates of 3.8 percent and 4.95 percent, respectively.
Additionally, food prices are expected to remain low in the near term due to improvements in weather conditions and lower electricity costs, further contributing to the country's economic stability.
The foreign exchange market has also remained stable, supported by the narrowing current account deficit, which narrowed to 4.1 percent of GDP in the 12 months to September 2019.
Furthermore, the MPC reported a 6.6 percent growth in private sector credit in the 12 months to October, with notable growth in the consumer durables sector, finance, and insurance.
As of October, the average commercial banks' liquidity and capital adequacy ratios stood at 51.2 percent and 18.3 percent, respectively, while the ratio of non-performing loans (NPLs) to gross loans declined to 12.3 percent in October from 12.6 percent in August.
The MPC welcomed the repeal of the rate cap, stating that it will restore the clarity of monetary policy decisions and strengthen the transmission of monetary policy.
