Markets rally as CBK cuts repo rate by 75bps to 11.25%

Markets in Kenya responded positively to the recent decision by the Monetary Policy Committee (MPC) to reduce the base lending rate to 11.25 per cent from 12 per cent. The move signals a significant easing of credit for borrowers, with implications for various sectors of the economy. Central Bank Governor Dr Kamau Thuge highlighted expectations for growth in agriculture, industry, and manufacturing in the coming years during a recent press conference. Speaking to CNBC Africa, Senior Investment Research Analyst Kevin Karobia shed light on the market implications of this policy stance. Karobia noted that the rate cuts were widely anticipated, leading to capital gains in various investment instruments and providing opportunities for investors to seek higher returns. The decision to decrease interest rates is expected to stimulate economic growth, particularly in capital-intensive sectors that had previously faced challenges in accessing affordable funding. The forecast for Kenya's economic growth in 2025 stands at 5.4%, with expectations of a rebound in manufacturing and other key sectors. Karobia also discussed the currency outlook, highlighting the strengthening of the Kenyan shilling against the dollar and the potential impact of factors such as tourism, remittances, and capital flows on the currency's performance. Looking ahead, it is anticipated that the positive market sentiment following the rate cut will continue to support economic activities and investment inflows in Kenya and the wider East African region.