The United States Federal Reserve’s decision to maintain interest rates within the 3.5% to 3.75% range has offered short-term stability to Kenya’s financial outlook, helping steady investor sentiment and reducing immediate market uncertainty, according to Ecobank’s Regional Director for Global Markets and Balance Sheet Management (Kenya and CESA Anglophone), Mohamed Souleymane.
Speaking on Thursday during a Radio Generation interview, Mohamed said the move by the US central bank plays a major role in shaping global financial conditions because of the influence of the American economy on international trade and investment flows.
He explained that the interest rate set by the Federal Reserve determines borrowing costs in the United States and directly influences how investors position their money across global markets, including emerging economies like Kenya.
The director noted that the decisions taken by the Federal Reserve are largely guided by domestic economic factors such as inflation trends and employment levels in the US.
Federal Reserve Chair Jerome Powell leads the institution, which operates under a dual mandate of maintaining price stability and supporting near full employment, he added.
Mohamed said earlier expectations in global markets had pointed towards a possible rate cut, driven by controlled inflation and strong job growth in the US economy. However, recent global developments have complicated that outlook.
He stressed that despite global events influencing sentiment, the Federal Reserve focuses strictly on domestic economic indicators rather than external geopolitical issues or global supply disruptions.
Explaining the global importance of the US currency, he said financial systems around the world remain heavily tied to it, affecting trade, borrowing, and investment decisions.
“The US Dollar is the most traded currency in the world,”
He added that the direction of US interest rates determines how global capital moves. When rates rise, investors often shift funds into the US in search of higher and safer returns, reducing inflows into emerging markets such as Kenya.
Federal Reserve Chair Jerome Powell. PHOTO/Handout
On the other hand, he said stable rates encourage continued investment into developing economies, supporting currency strength and financial stability.
“The Fed doesn’t take care of anything else,”
For Kenya, Mohamed said the decision to maintain rates provides a sense of short-term predictability for investors, multinational companies, and financial markets that depend on stable external conditions.
He explained that steady inflows of foreign capital help strengthen local currencies by increasing demand for them in international transactions.
“When flows come into a market, that gives strength to your currency,”
However, he warned that Kenya and other emerging economies remain exposed to global risks, especially from energy markets and geopolitical tensions.
He pointed to ongoing instability in the Middle East as a key factor influencing global oil prices, noting that disruptions in supply chains and production often take time to reflect in market adjustments.
According to him, even when tensions ease, fuel prices do not immediately respond due to delays in global logistics and supply chain rebalancing.
“For recovery, there is a lag,”
He added that if geopolitical conflicts continue or escalate, oil prices could remain high for an extended period, increasing inflationary pressure in oil-importing countries across Africa, including Kenya.
Mohamed also highlighted the growing importance of refining capacity within the continent, pointing to Nigeria’s Dangote refinery as a potential game changer for Africa’s fuel supply stability.
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However, he noted that despite such developments, Africa still depends heavily on imported refined fuel, leaving many economies vulnerable to global price shocks.
“We are not well positioned as a continent,”
He said the combination of US monetary policy and global geopolitical risks will continue to influence financial markets in the coming months, particularly as global attention shifts toward political and economic developments in the United States.
Mohamed concluded that while the Federal Reserve’s decision offers temporary relief, Kenya must remain alert to external shocks from both energy markets and global financial movements, which continue to shape inflation, currency stability, and investment flows.