- Decision
- Lower
- Rate change
- 25 bps
- central bank rate
- 9.75%
The Monetary Policy Committee of the Central Bank of Kenya cut the Central Bank Rate (CBR) by 25 bp to 9.75 percent, citing scope to bolster bank lending and growth while overall inflation, at 3.8 percent in May, sits comfortably below the 5 ± 2.5 percent target midpoint and the shilling remains stable. After 50 bp and 75 bp reductions in February and April, respectively, the CBR has fallen by 150 bp since the start of 2025. The operating framework is unchanged following April’s narrowing of the policy corridor to ±75 bp around the CBR. Core inflation inched up to 2.8 percent in May, but non-core pressures eased sharply; GDP growth slowed to 4.7 percent in 2024 yet is now projected at 5.2 percent for 2025, helped by resilient services, agriculture and a nascent recovery in private-sector credit, which accelerated to 2.0 percent year-on-year in May as average lending rates eased to 15.4 percent. Externally, the current-account deficit narrowed to 1.8 percent of GDP in the 12 months to April, fully financed by financial inflows, while foreign-exchange reserves rose to a record USD 10.8 bn (4.75 months of import cover). The Committee highlighted softer—but still uncertain—global growth, lingering tariff-driven inflation risks and ongoing geopolitical tensions, and affirmed its readiness to take further action as conditions evolve.
Rate evolution
From June 2025 to February 2026, the Central Bank of Kenya cut the Central Bank Rate by a cumulative 125 basis points to 8.75 percent from 10.00 percent in an uninterrupted easing cycle. The Monetary Policy Committee repeatedly judged there was scope to ease because inflation remained below the midpoint of the 5±2.5 percent target range and was expected to stay there in the near term, allowing it to support lending and economic activity while keeping inflation expectations firmly anchored and the exchange rate stable. Decisions were also backed by resilient growth, falling lending rates, a steady recovery in private sector credit, adequate foreign exchange reserves and a stable banking sector, even as surveys continued to cite subdued consumer demand and high business costs. The Committee cut the CBR to 9.00 percent in December and 8.75 percent in February as inflation stayed contained and credit strengthened, while flagging food-price pressures, adverse weather, trade-policy uncertainty and geopolitical tensions.
On August 11, 2026, the Committee held the CBR at 8.75 percent, judging the stance appropriate to keep inflation expectations anchored within the target range and the exchange rate stable. Overall inflation was broadly stable at 6.5 percent in July and was expected to remain within the target range in the near term, while the Committee noted stronger economic growth and private sector credit but said it would monitor global oil prices, potential second-round effects on inflation and other global and domestic developments.