Kenya's Central Bank cuts repo rate to 12.75% in latest MPC

Kenya's Central Bank has announced a reduction in the benchmark lending rate to 12.75% in the latest monetary policy committee meeting, signaling a positive outlook for the country's economy. The move comes as global inflation expectations continue to ease, prompting central banks in major economies to lower interest rates. The Central Bank of Kenya (CBK) Governor, Dr. Kamau Thuge, highlighted the success of previous measures in stabilizing exchange rates, lowering overall inflation, and moderating non-food, non-fuel inflation. The Monetary Policy Committee (MPC) emphasized the need for a gradual easing of the monetary policy stance to ensure exchange rate stability while closely monitoring global and domestic economic developments. The committee remains prepared to take further action as necessary to fulfill its mandate. The next MPC meeting is scheduled for October 2024. In its decision-making process, the MPC reviewed global economic trends, noting a moderation in global inflation rates despite a slower pace of decline. Major economies continue to experience easing headline inflation, although core inflation remains persistent due to service and wage price inflation. The global inflation rate is projected to decrease from 6.7% in 2023 to 5.9% in 2024, influenced by tight monetary policies and labor market conditions in the United States. Regarding international oil prices, there has been a moderation in prices, but geopolitical tensions in the Middle East could lead to elevated oil prices in the latter part of 2024. The recent decision by OPEC plus members to gradually increase oil production from October 2024 could impact global oil prices in the coming months. Food inflation has seen a decline due to improved supply of key food items such as sugar and cereals. Overall global food inflation is projected at minus 3.1, driven by decreased sugar and cereal prices alongside increased edible oil prices. Improved supply from countries like Argentina, Brazil, India, and Thailand has contributed to this trend. On the global economic front, there is a continued recovery in global growth supported by strong performance in the United States and promising growth prospects in countries like India and China. The IMF projections anticipate a 3.2% global economic growth rate for 2024, with a slight increase to 3.3% in 2025. The United States and the Eurozone are expected to see growth improvements, while emerging markets like China and India continue to show robust growth. In Sub-Saharan Africa, economic growth forecasts have been adjusted with Nigeria's growth rate revised downwards, impacting the regional average. Kenya's growth rate, on the other hand, remains higher than the regional averages, reflecting a positive growth trajectory for the country. With a growth rate of 5.6% in the previous year, Kenya's economy continues to outperform both advanced economies and regional averages. Looking ahead to 2024 and 2025, Kenya is poised to maintain its strong growth momentum compared to other countries in Sub-Saharan Africa. The favorable economic conditions, coupled with the CBK's proactive monetary policy decisions, bode well for Kenya's future economic prospects.