The Central Bank of Kenya has lowered its lending rate to 9.50 per cent, the 25-basis-point cut marks yet another cut as the economy continues to recover following last year's protests.
CBK cut the rate from 9.75 per cent, which is in line with the country’s lowest ever rate amid a changing global economy.
The decision made on Tuesday spells hope for Kenyans seeking cheaper loans since commercial banks use the Central Bank Rate (CBR) as a benchmark for setting lending rates. A cut means lower interest rates for loans and mortgages, making it cheaper for businesses and households to borrow.
“The Monetary Policy Committee (MPC) decided to lower the Central Bank Rate (CBR) by 25 basis points to 9.50 per cent from 9.75 per cent during its meeting held on August 12, 2025,” CBK said in a statement to the media.
According to the CBK, the overall inflation is expected to remain below 5 per cent, supported by lower food prices, stability in energy prices, and continued exchange rate stability. This is one of the factors that influenced the rate cut.
Another factor that the Monetary Policy Committee considered before making the decision is the country’s economic growth, which stands at 4.9 per cent after the first quarter of 2025, an increase from the third quarter of 2024. Furthermore, the CBK argues that the economy is expected to pick up this year and continue the growth in 2026.
According to Governor Kamau, the GDP growth is projected to hit 5.2 per cent this year and 5.4 per cent in 2026, driven by the service sectors, agriculture, and the recovery of the industrial sector.
In its report, MPC noted that the presence of global uncertainties, particularly related to increased tariffs and geopolitical tensions, is complicating the outlook for businesses.
“Having considered these developments, the Committee therefore concluded that there was scope for a further easing of the monetary policy stance to augment the previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity, while ensuring inflationary expectations remain firmly anchored and the exchange rate remains stable,” CBK stated.
A crucial point that Governor Kamau and his committee are expected to shed more light on in October is the proposal to revise the current lending model to the Risk-Based Credit Pricing model aims to enhance the effectiveness of monetary policy in influencing lending rates.
After the cut, all eyes now turn to commercial banks to see whether or not they follow suit and cut their lending rates. CBK has consistently cut its CBR since August 2024 from highs of 12.75 per cent, however, it has had a push-and-pull relationship with banks to effect lower interest rates for Kenyans.
In May, the bank threatened to explore options, including sanctions, to force local banks to adjust their lending rates. The Monetary Policy Committee (MPC) will meet again in October.
