Analysts expect the Central Bank of Kenya to cut lending rates to below 10 per cent by the end of 2025 for the first time in nearly 18 years.
This means Kenyans could enjoy even cheaper loans by the end of the year, potentially sparking a further spending and investment spree.
The analysts interviewed by international publication Reuters, however, indicate that they expect CBK to retain the benchmark lending rate at 10.75 per cent in April. The apex bank has cut 200 basis points since August last year.
According to the survey conducted on March 10 and March 26, which interviewed 10 analysts, nearly all concurred with Kenya retaining its base lending rate at 10.75 per cent.
The Central Bank Rate (CBR) is the interest rate at which the CBK lends to commercial banks and is the tool used to either cool the market or stimulate it. When the rate is high, banks also increase their interest rates for loans being issued in the market, and at times, banks opt to invest in government securities to avoid shocks in the market.
When the rate is low, banks also lower their interest rates, prompting more Kenyans to take up loans and spurring the economy. The rate, which has dropped to 10.75 per cent, has allowed banks to follow suit and lower their lending rates to Kenyans.
This trend is likely to continue in the upcoming Monetary Policy Committee (MPC) meeting, according to nine out of ten analysts interviewed by Reuters. The experts cite rising inflation, which has increased to 3.5 per cent from 3.3 per cent in January.
The experts, however, predict that the country’s economy will remain buoyant, forecasting that the benchmark lending rate could drop to below 10 per cent by the end of the year. This would be the first time since July 2007 that the rate has fallen below the 10 per cent mark.
According to experts, they anticipate that the CBK will cut 75 basis points in May, followed by a further 50 points cut midyear.
By the time the country enters the first quarter of the next financial year, the experts anticipate the CBR will have dropped to 9.50 per cent.
"Disinflation in the coming months will motivate rate cuts in Kenya and Ghana," said Rafiq Raji, a non-resident senior associate with the Africa programme at the Center for Strategic and International Studies in Washington, DC.
At the moment, banks have cut their lending rates. A spot check by Kenyans.co.ke indicates the rate across all banks has dropped from the average of 17 per cent per annum to between 13.5 per cent and 16 per cent.
The next Monetary Policy Committee (MPC) is scheduled to meet on Tuesday, April 8.
