The Central Bank of Kenya on Tuesday reduced its primary interest rate for the first time in four years, citing decreasing inflationary pressures as the main reason for the cut.
This decision comes as the government grapples with challenges in generating revenue and managing its public debt in the aftermath of violent demonstrations against tax increases.
Monetary Policy Committee (MPC) of the bank lowered the main interest rate by a quarter percentage point to 12.75 percent.
A statement by the Governor and chairman of the MPC, Kamau Thugge, said, “The MPC noted that its previous measures have lowered overall inflation to below the mid-point of the target range, stabilised the exchange rate, and anchored inflationary expectations.”
Kenya’s overall annual inflation rate fell to 4.3 percent in July from 4.6 percent in June.
“The MPC concluded that there was scope for a gradual easing of the monetary policy stance while ensuring continued exchange rate stability,” it added.
The rate cut came after Kenyan President William Ruto sought to ease the worst crisis of his near-two-year presidency when protests over tax hikes turned violent in June.
Ruto scrapped deeply unpopular tax increases, introduced amidst a cost-of-living crisis, that were meant to reduce public debt standing at $78 billion, according to treasury records.
Kenya’s Court of Appeal also annulled the controversial tax hikes adopted in 2023 over procedural issues at the end of July.
President Ruto sacked most of his cabinet in July and has been working to form a national unity government.
