US Fed Cuts Rates, Kenya Shilling To Stabilise Further At KSh 120 Per Dollar

• On Wednesday, September 18, the US Federal Reserve Bank lowered its base lending rate to 4.75%, signalling an ease in the dollar market
• Kenya shilling remained stable against the US dollar, as the Central Bank of Kenya (CBK) reported adequate foreign currency reserves
• Market analyst at FXPesa Rufas Kamau told TUKO.co.ke that the new federal reserve rate could trigger further strength of Kenya shilling in coming months

TUKO.co.ke journalist Wycliffe Musalia has over five years of experience in financial, business, and technology reporting and offers deep insights into Kenyan and global economic trends.

Kenya shilling is expected to continue appreciating its value against the US dollar in the coming months.

Central Bank of Kenya (CBK) official rates indicated that the shilling exchanged at 129.30 per US dollar in the second last week of September 2024.

Why Kenya shilling is gaining more strength

CBK governor Kamau Thugge noted that Kenya's foreign exchange reserves remained adequate, meeting the bank's threshold of four months of import cover.

This came as the US Federal Reserve slashed its interest rates in a surprising market move.

On Wednesday, September 18, the Fed cut the base lending rate by 50 basis points to 4.75%.

What'll be new shilling rate after US Fed decision?

Speaking exclusively to TUKO.co.ke, market analyst at FXPesa Kenya Rufas Kamau explained that the Fed Reserve's decision could drive the Kenya shilling higher to trade at KSh 120 against the US dollar.

Kamau noted that further rate cuts will weaken the US currency, strengthening the shilling in the market.

"The Fed surprised the market with a 50 basis point rate cut to 4.75%-5%. This is expected to weaken the USD and could drive the Kenya shilling higher towards 120.

"Projections of a further 100 basis points cut in 2025 are expected to drive further weakness in the dollar," said Kamau.

According to CNBC, the Fed projected a further reduction of the rate by half in its upcoming meetings in November and December.

The projected interest rate benchmark ranges between 4.25 and 4.5% in 2024, while the Fed projected a lending rate of 3.4% in 2025.

The projection goes up to 2026, when interest rates are cut further to 2.6%, indicating a weaker dollar and strong shilling.

John Mbadi projects strong Kenya shilling and economy

Treasury Cabinet Secretary (CS) John Mbadi highlighted the steps Kenya took to ensure economic growth.

According to the CS, the country managed to turn around the economy by stabilising the shilling and containing inflation.

On the debt payment, the CS noted that the government currently focuses on fiscal consolidation measures to improve the economy.