This archive report was first published on 25 November 2019.
On November 25, 2019, the Central Bank of Kenya (CBK) made a significant move to boost credit access and stimulate economic growth by cutting its benchmark lending rate for the first time since May 2018.
CBK's Monetary Policy Committee, which sat for the first time since Kenya lifted a cap on commercial interest rates on November 7, 2019, cut the CBR rate to 8.50% from 9.0%.
The decision was made after the committee noted that the economy was operating below its potential and that there was room for accommodative monetary policy to support economic activity, according to Dr. Patrick Njoroge, the CBK Governor and chair of the committee.
However, banks may not necessarily lower their lending rates in response to the CBK's signal, as they can ignore the signal in an environment where the State is not controlling borrowing costs, according to Mr. Habil Olaka, the CEO of Kenya Bankers Association.
Instead, lenders may consider other tools beyond the benchmark rate when pricing their loans, including government borrowing, which influences the cost of long-term deposits that affect borrowing rates.
