Kenya’s Rates Are Falling

In its latest Monetary Policy Committee decision, the Central Bank lowered the Central Bank Rate by 25 basis points to 9.00 percent from 9.25 percent, signalling continued confidence that inflation pressures are contained and that there is room to support credit and economic activity.

The committee’s own inflation breakdown explains the logic. Overall inflation eased slightly, while core inflation — which strips out volatile items — continued to decline, helped by lower prices of processed food items such as maize flour and sugar. At the same time, non-core inflation moved higher, pushed up mainly by vegetables including tomatoes, onions and cabbages.

That split matters. It tells policymakers that broad price pressures are not runaway — but it also tells households why the market feels expensive even when the headline inflation figure looks moderate.

Average commercial bank lending rates have edged lower, and private sector credit growth has shown signs of improvement, suggesting that demand and supply of credit are both picking up as borrowing costs gradually ease.

Holding fuel prices steady can prevent a new round of fare increases and cushion the cost of moving goods. Yet households rarely spend on fuel alone. Food prices, rent and school-related costs can easily outweigh any benefit from stable pump prices — and where vegetable prices rise, the relief is diluted fast. Policymakers have already pointed to vegetables as a key driver of recent pressure in household budgets.

Kenya’s inflation and cost-of-living story is not purely domestic. Freight, insurance and shipping times play a role in import costs, and East Africa’s trade links remain exposed to global route disruptions.

The numbers suggest the macro environment is stabilising. Inflation remains within target, fuel has not delivered a fresh shock, and monetary policy is leaning toward support for economic activity.

Source: All Africa