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 cutting the base lending rate to 8.5% from 9%.
CBK Governor Patrick Njoroge welcomed the repeal of interest rate caps, citing a significant rationing of credit as a result. The Monetary Policy Committee (MPC) noted that this reform would restore the clarity of monetary policy decisions and strengthen the transmission of monetary policy.
According to Governor Njoroge, the banking sector charter adopted by banks defines a commitment to entrench a responsible and disciplined banking sector responsive to the needs of customers.
The MPC also observed that inflation expectations remained well-anchored within the target range and that the economy was operating below its potential level.
Furthermore, the Committee noted the ongoing tightening of fiscal policy and concluded that there was room for accommodative monetary policy to support economic activity.
As a result, the MPC decided to lower the Central Bank Rate (CBR) to 8.5% from 9% and will closely monitor the impact of this change in its policy stance.
