Kenya’s economic landscape received a cautiously optimistic boost in June as the Central Bank of Kenya (CBK) reported a steady inflation rate of 3.8%, while simultaneously taking a bold step to reduce the benchmark lending rate, signaling a renewed push to stimulate economic activity and ease pressure on borrowers.
The inflation figure, down slightly from May’s 4.0%, marks the lowest level in over a year, a reflection of falling food prices, stable fuel costs, and improved supply chain conditions. According to data released by the Kenya National Bureau of Statistics (KNBS), the food and non-alcoholic beverages index saw a month-on-month drop, largely driven by declines in the prices of vegetables, cereals, and cooking oil.
In a move that has sparked wide interest in financial circles, the CBK Monetary Policy Committee (MPC) trimmed the Central Bank Rate (CBR) from 13.0% to 12.5%. The decision is aimed at reducing the cost of credit and reigniting private sector investment, especially critical as the country seeks to shake off sluggish GDP growth and high unemployment rates.
“The easing of the rate is informed by the sustained decline in inflation and improved macroeconomic stability,” said CBK Governor Dr. Kamau Thugge. “Our focus remains on anchoring inflation expectations while supporting economic recovery.”
Analysts have lauded the dual announcement as a positive signal, but with caution. “It’s a welcome move, but commercial banks must follow suit by lowering lending rates to have a real impact,” noted economist Angela Mugo.
Meanwhile, consumers and business owners are hopeful that the policy shift will translate into lower loan repayments, enhanced credit access, and revived consumer confidence.
As Kenya maintains inflation within the CBK’s target band of 2.5% to 7.5%, the central bank’s balancing act between curbing inflation and driving growth appears to be on track, for now.
