WASHINGTON D.C. – The United States Federal Reserve has signalled a strong inclination to hold interest rates steady for the remainder of the year, a move with significant economic implications for Kenya. According to minutes released on Wednesday, November 19, 2025, from the Federal Open Market Committee's (FOMC) October 28-29 meeting, many officials believe no further cuts are immediately necessary.

At the October meeting, the US central bank implemented its second interest rate cut of the year, lowering the benchmark federal funds rate to a range of 3.75% to 4.00%. However, the newly released minutes reveal a committee divided on the next steps, with many participants suggesting it would be appropriate to keep the target range unchanged through December. This cautious stance is rooted in concerns over persistent inflation and a desire to assess the impact of previous cuts on the US economy.

The decision in Washington has a direct and immediate impact on Kenya's economy, primarily through the currency exchange rate and the cost of national debt. A stable or higher US interest rate makes dollar-denominated assets more attractive to global investors, which typically strengthens the US dollar. This appreciation puts downward pressure on the Kenyan shilling.

Implications for Kenya's Economy

A weaker shilling makes critical imports such as fuel, food, and industrial machinery more expensive, which can fuel domestic inflation and increase the cost of living for ordinary Kenyans. Analysts have forecast that the shilling could face depreciation pressure in 2025 due to factors including increased demand for dollars for imports.

Furthermore, the strengthening of the dollar poses a significant challenge to Kenya's public debt management. A substantial portion of Kenya's external debt is denominated in US dollars. According to a report from the Kenya Association of Manufacturers, 67% of the country's external public debt is held in US dollars. Other reports from 2025 indicate that this exposure, while slightly reduced, remains significant at over 52%. Consequently, when the shilling weakens against the dollar, the amount of shillings required to service this debt increases, straining the national budget and potentially diverting funds from essential public services.

Conversely, a decision by the Fed to cut rates, as it did in September and October, can offer relief. Lower US rates can weaken the dollar, easing pressure on the shilling and reducing debt service costs. Such a move can also make Kenyan markets more attractive for foreign investors seeking higher returns than those available in the US, potentially boosting capital inflows.

Trump's Pressure on the Federal Reserve

The Fed's cautious approach comes amid sustained public pressure from President Donald Trump, who has repeatedly called for lower interest rates to stimulate the US economy. On Wednesday, November 19, 2025, speaking at an investment forum, Trump renewed his attacks on Fed Chair Jerome Powell, stating he would "love to fire his ass."

President Trump also publicly pressured Treasury Secretary Scott Bessent to influence the central bank's independent decisions. "The only thing Scott's blowing it on is the Fed, because the rates are too high, Scott," Trump said. "And if you don't get it fixed fast, I'm going to fire your ass." Bessent, a former hedge fund executive, was sworn in as the 79th Secretary of the Treasury on January 28, 2025. The Federal Reserve, however, operates as an independent agency to insulate monetary policy from short-term political pressures.

As Kenyan policymakers and businesses monitor the global economic environment, the Federal Reserve's next meeting in December will be closely watched. The decision made there will create ripple effects felt across the globe, influencing everything from the price of bread in Nairobi to the nation's capacity to invest in its future.