The Central Bank of Kenya (CBK) has further decreased the benchmark lending rate by 75 basis points, bringing it down to 11.25 percent, which represents the third reduction in rates this year.
During the final Monetary Policy Committee meeting of the year, CBK Governor Dr. Kamau Thugge encouraged commercial banks to lower their lending rates in light of this adjustment.
He indicated that this decision was influenced by a decline in inflation, a relatively stable currency, and a slowdown in economic activity during the first half of the year.
Nevertheless, the regulator expressed concerns that, despite multiple rate cuts, commercial banks in the nation have been hesitant to pass on the benefits to borrowers.
“Indeed, banks have been slow to reduce their interest rates. As you are aware, I have held discussions with the banks. In the past two weeks, we have met with all the bank CEOs, and I believe they now recognize the necessity of actively lowering interest rates for consumers,” stated Dr. Thugge.
This appeal follows a recent meeting between the CBK and bank CEOs aimed at addressing persistently high lending rates.
Credit growth to the private sector in Kenya has faced challenges, exhibiting signs of stagnation.
Initially, banks across the country resisted lowering interest rates, citing an increase in deposit rates, which hindered their ability to reduce lending rates.
“Currently, the situation has changed; the 91-day Treasury bill, which was approximately 16 percent just a few days ago, is now at 10.45 percent,” the CBK Governor noted.
“Consequently, as some deposits begin to mature, banks should now be in a position to lower their funding costs, and they ought to translate these savings into reduced lending rates. This will enable us to extend more credit to the private sector and less to the government, thereby stimulating economic activity and creating jobs.”
The Monetary Policy Committee is scheduled to reconvene in February of the following year.
