Central Bank Lowers Lending Rates
This sets the stage for reduced monthly repayments by borrowers after commercial banks reduce their lending rates and lowering costs of credit for those who need new funding. MPC’s decision to lower the Central Bank Rate was prompted by the steady decline in inflation in the recent months, relative stability of the shilling and strong business confidence.
Since December last year, Central Bank maintained the CBR (Central Bank Rate) at 18 percent in a bid to save the shilling which had depreciated to a low of Sh107 to the US dollar in mid-October and hold inflation which had risen to a 19.7 percent high in November.
Central Bank Rate is the lending rate of central bank to commercial banks after considering operational costs and profits. The bank lending rates is a way to regulate the level of economy in the country. With the current the inflation rate at 10 percent last month, the country has recorded a steady fall in the cost of living due to lower fuel prices and increased food supply which has lessened the food component of the Consumer Price Index.
MPC is also expected to announce more cuts in a bid to improve the economy which has slowed down in recent months due to the high inflation and interest rates.
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