By Nicholas Bariyo
KAMPALA, Uganda--Kenya's central bank slashed its interest rate by 75 basis points to 11.25% as east Africa's largest economy seeks to rev up sluggish growth amid easing inflation.
Kenya's economy grew 4.8% in the first half of 2024, slowing from 5.5% in the same period last year and necessitating the easing of monetary policy to support the economy, the central bank's Governor Kamau Thugge said.
"The Monetary Policy Committee noted that overall inflation was expected to remain below the midpoint of the target range in the near term, supported by low fuel inflation, stable food inflation, and exchange rate stability," he said.
Kenya's inflation rate rose to 2.8% in November from 2.7% in October, registering the first rise since August. But inflation is still well below the central bank's target of 5%, leaving room for a rate cut, according to economists.
Last month, the International Monetary Fund warned Kenya against premature interest-rate cuts, urging that such measures risk spiking inflation and undermining the country's ability to attract foreign investment. But the central bank insists that cutting rates will boost growth and curb the rise in nonperforming loans in the banking sector.
Kenyan authorities have been struggling to steady the country's economy, following the outbreak of widespread protests in June over the government's proposal to introduce new taxes on basic commodities, including fuel and bread, to ease spiraling public debt. Dozens were killed in the protests, which prompted the government to withdraw the tax proposals.
The central bank expects economic growth to reach 5.1% in 2024 and hit 5.5% in 2025, supported by the service sector and agriculture.
Write to Nicholas Bariyo at Nicholas.Bariyo@wsj.com
(END) Dow Jones Newswires
12-05-24 1231ET
