Kenya’s central bank has cut its benchmark interest rate for the sixth consecutive time to help shore up the economy as inflation remained benign.
The apex bank Governor Kamau Thugge, in a statement on Tuesday, announced that the rate has been reduced to 9.75% from 10.00%.
“The committee concluded that there was scope for a further easing of the monetary policy stance to augment the previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity,” Thugge said in the statement. It will also ensure “inflationary expectations remain firmly anchored, and the exchange rate remains stable,” he added.
The move comes amidst a divided outlook from economists, though the Central Bank emphasized the need for further easing of monetary policy to enhance previous actions.
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While the Central Bank has consistently lowered rates, the actual lending rates by commercial banks have not always followed suit proportionately, creating a gap that the regulator is keen to close.
The annual inflation rate cooled to 3.8% last month from 4.1% in April. The central bank’s main gauge for underlying price growth ticked up to 2.8% in May from 2.5% a month earlier.
Inflation has remained below the midpoint of the target range for the past year, but the central bank expects it to edge toward the upper level by September. The MPC has lowered borrowing costs by a cumulative 325 basis points since August.
