Prime Bank has has announced that it will be reducing its base lending rate by 1.5% to 22.5% from August this year. This follows Central Bank of Kenya's Monetary Policy Committee decision earlier this month to reduce the Central Bank's base lending rate by 1.5% to 16.5%.

Prime Bank's decision to reduce lending rates follows Barclays Bank, Bank of Baroda and CFC Stanbic banks'  decisions to reduce lending rates based on CBK reducing the base rate. The cost of credit is expected to reduce further with hopes of the MPC reducing the base rate again informed by economic performance.

The MPC announcement came as a relief to borrowers with more banks expected to lower their lending rates in time. The MPC said it reduced the Central Bank Rate owing to stability of the local currency and steady drop in inflation rates. Inflation for the month of June stood at 10.05% down from 12.22% in May 2012.

The average lending rates in the country increased from around 10% in 2010 to an average of 24% in December 2011 owing to the weak shilling in that period and increased inflation which hit a high of 19%. Single digit inflation rates, which the government intends to achieve by the end of the year, could see borrowers get loans at lower rates based on competition and lower Central Bank's base lending rate.