Kenya’s CBK slashes key rate to 9.50%, the seventh straight cut since 2024, to spur lending and growth amid stable 4.1% inflation.
Kenya Cuts Interest Rate to 9.50% in Seventh Straight Reduction
The Central Bank of Kenya (CBK) has lowered its benchmark lending rate by 25 basis points to 9.50% from 9.75%, marking its seventh consecutive cut since November 2024. The decision, made by the Monetary Policy Committee (MPC), sets the rate at its lowest level since May 2023 and signals a strong push to stimulate economic growth.
Objective: Stimulating Credit and Economic Activity
The CBK said the move aims to boost private sector lending, strengthen domestic investment, and support economic recovery. Kenya’s economy has been navigating sluggish credit growth, rising fiscal pressures, and the lingering effects of global trade disruptions.
By lowering the cost of borrowing, the CBK hopes commercial banks will extend more affordable loans to small and medium-sized enterprises (SMEs), manufacturing firms, and households — a key step toward accelerating GDP growth.
Inflation Remains Stable in Target Range
Kenya’s inflation rate stood at 4.1% in July 2025, up slightly from 3.8% in June, but still well within the CBK’s target range of 2.5% to 7.5%. The uptick was mainly due to seasonal food price increases and import cost adjustments.
The bank noted that price stability provides room for monetary policy easing, aligning Kenya with a broader trend among African central banks that are cutting rates as inflation cools.
Economic Growth Forecast Holds Steady
Despite high debt servicing obligations and lower-than-expected tax revenues, the CBK has kept its GDP growth forecast unchanged at 5.2% for 2025 and 5.4% for 2026.The World Bank revised its 2025 GDP growth projection down to 4.5%.
Growth is expected to be supported by strong performance in Kenya’s export sectors — including tea, horticulture, and tourism — alongside expanding infrastructure investment and regional trade integration under the East African Community (EAC).
Broader Policy Context
The CBK’s rate cut continues a policy easing cycle that began in November 2024, resulting in a total reduction of 175 basis points over nine months.
This mirrors moves by other emerging market economies, where central banks are seeking to stimulate growth in the face of moderating inflation and subdued global demand.
The CBK emphasised that it will monitor economic conditions closely and adjust policy if necessary to maintain macroeconomic stability. Analysts will now watch to see if the rate cuts translate into lower lending rates for consumers and businesses.
