The cost of credit is expected to reduce in coming months if commercial banks pass on the benefits of a lower benchmark interest rate and cash reserve ratio to borrowers.
This is after the central bank on Wednesday reduced the benchmark lending rate to 10.75pc, the lowest in a year.
In addition, policymakers at the central bank have reduced the Cash Reserve Ratio from 4.25pc to 3.25pc, to free up more cash held by commercial banks for lending the private sector to stimulate economic activity.
In a statement, Central Bank of Kenya Governor Dr. Kamau Thugge, who chairs the Monetary Policy Committee hinted that if banks fail to immediately reduce the cost of credit to reflect the easing of the monetary policy stance, the regulator would take steps to enforce lower lending rates, which includes penalties for individual banks.
The measure is being taken after the Monetary Policy Committee noted that economic growth decelerated in 2024.
