The Central Bank of Kenya (CBK) is likely to slash the country's lending rates further, offering an opportunity for Kenyans to access, among other benefits, cheaper loans, experts have projected.
Experts from Goldman Sachs Group Inc. have projected that the CBK could further slash the base lending rates from the current 10.00 per cent basis to 8.5 per cent.
According to the experts, Kenya is likely to ease the rates due to the perceived benefits the country is set to get from improved terms of trade.
''We continue to expect the Central Bank of Kenya to cut its policy rate at consecutive meetings to an 8.5 per cent terminal rate'' from 10 per cent, Goldman Sachs Group Inc.’s Andrew Matheny and Mambuna Njie wrote in a client note.
CBK, in its latest Monetary Policy Committee (MPC) report published on Tuesday, April 8, announced that it had reduced the base lending rate by 75 basis points to 10.00 per cent from 10.75 per cent.
Meanwhile, according to Bloomberg, central banks in key African economies, including Kenya, are getting set to line up with other emerging markets in the coming weeks and cut interest rates where inflation pressures are seen abating, or stay on guard where the path is less clear.
It would, however, be interesting to see how the CBK will handle the rate cuts after it recently disputed reports that it planned to return to the era of interest rate caps amid concerns over the delay from banks to lower lending rates when the apex bank lowers its central bank rate.
The concerns emerged after CBK published a Consultative Paper on the Review of the Risk-Based Credit Pricing Model in April, inviting views from the public on a raft of changes. But the paper, which is now in the review stage, was misunderstood, according to the banking regulator.
This will also be the second time when CBK could be lowering the rates since the US President Donald Trump imposed a 10 per cent tariff on Kenya and slapped China, one of Kenya's largest trading partners, with a 145 per cent levy before reducing it to 30 per cent for 90 days.
To counter the impact of the US tariffs on their economies, Bloomberg reports that Kenya and other African economies will probably reduce their interest rates.
According to CBK Governor Kamau Thugge, the decision to lower interest rates is intended to stimulate lending by banks to the private sector and support economic activity while ensuring exchange rate stability.
Other factors that have influenced lending rate cuts include the moderation in global headline inflation, which is, however, likely to change with the potential inflationary impact of higher tariffs on imports.
