In a move that is expected to stimulate economic growth and provide relief to borrowers, the Central Bank of Kenya (CBK) has announced a reduction in the Central Bank Rate (CBR).

The decision, which was made by the Monetary Policy Committee (MPC) on Tuesday, brings the CBR to 12.00 per cent from its previous level.

The MPC's decision was informed by a number of factors, including a decline in inflation, a strengthening of the Kenyan shilling, and a slowdown in economic growth.

"The MPC also noted the sharp deceleration in credit to the private sector, and the slowdown in growth in the second quarter of 2024, and concluded that there was scope for a further casing of the monetary policy stance to support economic activity while ensuring exchange rate stability," MPC said.

"Therefore, the Committee decided to lower the Central Bank Rate (CBR) to 12.00 percent."

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Inflation, which had been on the rise in recent months, has now fallen to 3.6 per cent in September 2024, well below the government's target range of 2.5 to 7.5 per cent largely attributed to lower food and fuel prices.

Despite the positive signs, the MPC also acknowledged that the Kenyan economy has experienced a slowdown in recent months, with real GDP growth falling to 4.6 per cent in the second quarter of 2024.

The committee expressed concerns about the impact of this slowdown on the overall health of the economy and the livelihoods of Kenyans.

In response to these developments, the MPC concluded that there was room for a further easing of monetary policy.

The reduction in the CBR is expected to lower interest rates for borrowers, making it cheaper for businesses and individuals to access credit.

This, in turn, could stimulate investment, consumption, and job creation.

However, the MPC also cautioned that the economy faces several risks, including the ongoing conflict in the Middle East, rising food prices, and the possibility of a global economic slowdown.

The committee said it would continue to monitor these risks closely and stand ready to take further action as necessary.

Dr. Kamau Thugge, the Chairman of the MPC, said that the decision to cut the CBR was a balanced one that takes into account both the need to support economic growth and the importance of maintaining price stability.

The MPC's decision is expected to have a positive impact on the Kenyan economy by spurring various segments of the economy to wade through the tough environment.

By making it cheaper for businesses to borrow money, the central bank is hoping to encourage investment and job creation.

However, the full impact of the rate cut will depend on a number of factors, including the global economic outlook and the government's ability to implement sound economic policies.