Kenya's central bank cut its Central Bank Rate (CBR) by 50 basis points to 10.00 percent, saying it remains concerned over the "persistent" slowdown in private sector growth at the same time that inflation is expected to decline in the short term amid moderate demand pressure on inflation.
The Central Bank of Kenya (CBK) has now cut its rate by 150 basis points this year following a 100-point reduction in May.
Kenya's inflation rate eased to 6.26 percent in August from 6.4 percent in July, within the government's target range 2.5 percent to 7.5 percent.
As in its July statement, the central bank said the 3-month annualized non-food-non-fuel inflation rate has remained stable since June, indicating no significant demand pressures in the economy.
The foreign exchange market has also remained stable, reflecting a narrower current account deficit, resilient diaspora remittances and improved tourism earnings. The current account deficit is expected to narrow to 5.5 percent of Gross Domestic Product this year form 6.8 percent in 2015.
The central bank's foreign exchange reserves rose to US$7.803.6 billion from $7.769.6 billion at the end of July.
The CBK said it's monetary policy committee was "closely monitoring the impact" of the new banking act that took effect on Sept. 14 and would continue to put in place measures to sustainably reduce the cost of credit and improve liquidity management.
Kenya's government has ordered commercial banks to limit their lending rates to 4 percentage points above the CBK's base rate. Last week the central bank said the base rate equaled its Central Bank Rate and not the Kenya Bank's Reference Rate.