The central bank of Kenya lowers the policy rate since inflation is well within goal

Kenya’s central bank lowered its main lending rate for the eighth meeting in a row on Tuesday. They said they could loosen monetary policy even more because inflation is still well within their goal range.

The Central Bank of Kenya’s policy rate (KECBIR=ECI) will go up from 9.50% to 9.25% because of the move.

The bank’s Monetary Policy Committee (MPC) said the 25 basis-point rate cut would build on earlier steps to get banks to lend more to the private sector, boost economic activity, and keep inflationary expectations stable.

“The MPC will closely monitor the impact of this policy decision as well as developments in the global and domestic economy and stands ready to take further action as necessary in line with its mandate,” it said in a statement.

The KECPI (also known as ECI) for consumer prices rose slightly from 4.5% the previous month to 4.6% year-over-year in September. This was well within the goal range of 2.5% to 7.5%.

It was 5.4% in August, but the central bank raised its prediction for next year’s economic growth to 5.5%. It didn’t change its prediction for 2025, which was 5.2%.

“The growth of the economy is expected to pick up … supported by continued resilience of key service sectors and agriculture, and continued recovery of the industry sector,” it said.

Before, the central bank thought that this year’s current account gap would be 1.5% of GDP. Now, they think it will be 1.7% of GDP.

The biggest economy in East Africa has a lot of debt, but it has been trying to lower the risks of borrowing by buying back bonds and other methods.