In July, the Central Bank of Kenya (CBK) announced it would reduce the interest rate by 25 basis points to 12.75%. This move by the CBK highlights the end of the tightening cycle after inflation began slowing down in July.
According to the inflation statistics, this is the first time the interest rates have dropped since its increase in April 2020. At that time, the interest rate remained at 7% until after two years, then proceeded to increase sharply, reaching a peak of 13% in April 2024.
Inflation is expected to remain below the midpoint of the target range in the near term, supported by a stable exchange rate, lower food prices with expected harvests, and stable fuel prices.
CBK, after the Monetary Policy Committee (MPC) meeting last Tuesday
The CBK increased the interest rates in December 2023 and February 2024 to combat the rising inflation in the country.
The Kenyan inflation rate declined to 4.3% in July from 4.6% in June. However, food inflation maintained a rate of 5.6% for both months.
An earlier report by the Central Bank of Kenya (CBK) highlighted that the Kenyan shilling has been stable for over six months as the economy of the country grew by 5% in the first quarter of 2024.
Analysts from the CBK predict that Kenya’s economy will grow by 5.4% in 2024, with agriculture, services, and exports playing a crucial role in pushing the economy to greater heights.