In brief
- The Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) delivered a 25bps cut in its June 2025 meeting to bring the Central Bank Rate to 9.75%, against our pause expectation. The dovish stance came against the backdrop of a fragile external environment and the necessity to ramp up domestic growth prospects.
- Eighteen months ago, the economy faced head on the 4 Apocalyptic Horsemen: battered Kenyan Shilling, higher domestic rates, elevated inflation pressures and sluggish economic prospects. Three of the risks have now moderated. This leaves us with sluggish growth prospects to contend with, amplified by global trade concerns and domestic strains.
- The salient tone from the MPC was the marked upswing in the current account balance, which was first telegraphed in the April 2025 MPC meeting. The current account deficit is now projected to be 1.5% this year, down from 2.8% in the previous MPC meeting.
- The uptick in the 12-month growth in private sector credit from 0.4% in April 2025 to 2.0% in May 2025 is primarily the green shoots of the policymakers’ accommodative stance. Further to the recent MPC measures, the CBK published a consultative paper late April 2025 to review the risk-based credit pricing model framework.
- We understand that Article IV Consultations will be held in September 2025 and with the possibility of kickstarting negotiations for the next IMF successor programme. Given the improved balance of payment position, this has given both the fiscal and monetary authorities an added ammunition of patience in their engagement with the IMF. We thus reiterate our long-held view of a no-successor programme in the near term.
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