Kenyans are set to continue borrowing at cheaper rates after the Central Bank of Kenya on Wednesday announced a further reduction of the borrowing rates.
CBK slashed the Central Bank Rate (CBR), the rate at which it lends to other banks, by 25 basis points to 9.25 from 9.50 per cent. This followed a Monetary Policy Committee (MPC) meeting on Wednesday.
''The Monetary Policy Committee (MPC) decided to lower the Central Bank Rate (CBR) by 25 basis points to 9.25 per cent from 9.50 per cent, during its meeting held on October 7, 2025,'' read part of the resolutions of the MPC.
The decision will be a major boost for Kenyans seeking cheaper loans and mortgages since commercial banks use the CBR as a benchmark for setting lending rates.
Kenya’s overall inflation stood at 4.6 in September 2025 compared to 4.5 per cent in August, and remained below the mid-point of the target range of 5±2.5 per cent.
CBK revealed that the core inflation (a measure of the total change in the prices of all goods and services) declined to 2.9 in September from 3.0 per cent in August, mainly on account of lower prices of processed food items, particularly maize flour.
On the other hand, non-core inflation increased to 9.6 in September from 9.2 per cent in August, mainly driven by higher prices of vegetables, particularly tomatoes, carrots, onions, and cabbage.
''Overall inflation is expected to remain below the midpoint of the target range in the near term, supported by stable energy prices, and continued exchange rate stability,'' CBK said.
The regulator expressed optimism that the prices of key crops, particularly maize and fuel prices, will remain stable. Additionally, the exchange rate stability will offer a major boost to support a stable inflation rate.
''The optimism was attributed to improved agricultural production supported by favourable weather conditions, the stable macroeconomic environment with low inflation and stable exchange rate, declining interest rates, and resilient performance of tourism and the digital economy.''
Meanwhile, the MPC expressed hope that it would further realign accountability to ensure that commercial banks adhere to the 8th consecutive rate cuts.
To achieve this, the rollout of the revised banking sector Risk-Based Credit Pricing (RBCP) model, which will be fully operational by March 2026, will improve the transmission of monetary policy decisions to commercial banks’ lending interest rates and enhance transparency in the pricing of loans by banks.
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