Global markets breathed a sigh of relief Friday, buoyed by fresh data showing that inflation in the United States cooled more than expected in November. The news, coupled with stellar earnings from chipmaker Micron Technology, has renewed hopes for another US interest rate cut, a move that could have significant positive effects on the Kenyan economy.

This development is critical for Kenya as US monetary policy directly influences the strength of the Shilling and the cost of servicing the country's dollar-denominated debt. A potential cut in US interest rates could lead to a weaker dollar, making imports like fuel and food cheaper for Kenyans and providing the government with more breathing room in its budget.

US Inflation Eases, Boosting Rate Cut Hopes

The US Consumer Price Index (CPI) rose at a 2.7% annual pace in November, a slower rate than the 3% economists had forecast. This figure, released by the Bureau of Labor Statistics, is the lowest since July and suggests that price pressures in the world's largest economy may be easing. The core inflation rate, which strips out volatile food and energy prices, also fell to 2.6%, its lowest level since March 2021.

The unexpected slowdown has bolstered arguments for the US Federal Reserve to continue its recent trend of cutting interest rates. The Fed already lowered its benchmark rate in September, October, and December, bringing it to a range of 3.5% to 3.75%. While some Fed officials have urged caution, analysts believe this new inflation data makes another cut in early 2026 more likely.

Micron Earnings Soothe Tech Sector Nerves

Adding to the market's upbeat mood, US tech firm Micron Technology reported record-breaking quarterly results that shattered analyst expectations. The memory chip manufacturer announced revenues of $13.64 billion (approx. KES 1.76 trillion) and non-GAAP net income of $5.48 billion (approx. KES 707 billion) for the quarter ending in November.

The company's performance, driven by soaring demand for its chips used in artificial intelligence (AI) systems, has calmed fears of a slowdown in the tech sector. Micron's wildly optimistic forecast for the next quarter, nearly doubling profit expectations, sent its stock surging and lifted semiconductor-related stocks globally.

Global Central Banks Diverge

The positive news from the US contrasted with policy tightening in Japan. The Bank of Japan on Friday raised its key interest rate by 25 basis points to 0.75%, the highest level in three decades, as it continues to battle persistent inflation and a weak yen. Governor Kazuo Ueda noted that the bank would continue to adjust its policy as needed to achieve its 2% inflation target.

For Kenya, the divergence is key. While Japan's move has its own global implications, the dominant factor for the local economy remains the US Federal Reserve's actions. A weaker dollar resulting from US rate cuts typically makes emerging markets like Kenya more attractive to foreign investors seeking higher returns.

Analysts will now be closely watching the Federal Reserve's upcoming statements for clues on its 2026 policy path. For Kenyan households and businesses, the central bank's next move in Washington could be the determining factor for the cost of living and the direction of the economy in the new year.