By George Obulutsa
NAIROBI (Reuters) – Kenya’s central bank cut its main interest rate for the fourth meeting in a row on Wednesday, saying it wanted to do more to support lending and boost economic growth.
The Central Bank Rate was lowered by 50 basis points to 10.75%, in line with the forecast of a Reuters poll of four economists.
The bank’s Monetary Policy Committee also decided to cut the Cash Reserve Ratio – by 100 basis points, to 3.25% – and said it had started on-site inspections of banks to check they were passing on the benefits of lower funding costs to customers.
“The committee noted that economic growth decelerated in 2024, and therefore there was scope for a further easing of the monetary policy stance to support economic activity, while ensuring exchange rate stability,” it said in a statement.
It added that inflation was expected to remain below the midpoint of the 2.5%-7.5% target range in the near term.
Its statement echoed the last monetary policy statement in December, when the central bank also cited the need to support the economy.
On Wednesday, it forecast the economy would expand 5.4% this year, up from estimated growth of 4.6% last year but slower than 2023’s 5.6% rise in GDP.
It said growth would be “supported by resilience of key service sectors and agriculture, expected recovery in growth of credit to the private sector, and improved exports”.
The bank projects a current account deficit of 3.8% of gross domestic product this year, slightly up from 2024’s estimated 3.7% deficit. In 2023, the deficit was 4.0% of GDP.
Last year, the current account deficit was more than fully financed by capital and financial inflows, resulting in an overall balance of payments surplus of $1.466 billion, it said.
This surplus, together with International Monetary Fund disbursements, resulted in a buildup of gross reserves by $2.749 billion in 2024, it added.
(Reporting by George Obulutsa; Editing by Alexander Winning and Kevin Liffey)
