The Central Bank of Kenya's Monetary Policy Committee has this afternoon resolved to reduce the Central Bank Rate from 18% to 16.5%. This is a welcome move for borrowers as it could indicate lower interest rates on loans offered by banks. Commercial banks peg the interest they loan money to borrowers on the CBR.

The MPC said all economic indicators pointed towards a stabilizing economy hence the move to lower the lending rate. Statistics released last month by the Kenya National Bureau of Statistics showed that the rate of inflation has  dropped from 12.22% to 10.05% in June. The Central Bank had projected that inflation rates could hit single digits by the end of the year.

The Central Bank Rate has been maintained at 18% since December last year pushing the cost of credit up. Commercial banks have been charging interest rates on loans averaging 24% from December last year.