The Central Bank of Kenya reduced its benchmark lending rate by 25 basis points today, bringing it down to 9.25 per cent, in its eighth consecutive cut as consumer inflation remains firmly within allowable limits.
The move comes as Kenya’s inflation for September stood at 4.6 per cent year-on-year, slightly up from 4.5 per cent in August, but still well inside the central bank’s target band of 2.5 to 7.5 per cent. The Monetary Policy Committee said there remains room to ease monetary policy further if warranted by evolving economic conditions.
The bank reaffirmed its forecast for 2025’s growth at 5.2 per cent, and nudged up its projection for 2026 to 5.5 per cent, citing strength in services, agriculture and a rebound in industry. It also revised its estimate for this year’s current account deficit to 1.7 per cent of GDP from an earlier 1.5 per cent.
According to the Monetary Policy Committee, the rate cut is intended to reinforce earlier easing and stimulate bank lending to the private sector while preserving anchored inflation expectations and exchange rate stability. The committee emphasized that it will monitor both global and domestic developments and is prepared to adjust policy further as needed.
Commercial banks use the central bank rate as a benchmark for pricing loans. Under the new rate, lending costs should ease for households and businesses, potentially spurring credit growth. Kenya has been implementing a revised Risk-Based Credit Pricing model, set to be fully operational by March 2026, aimed at improving the transmission of central bank rates to commercial lending rates and increasing transparency in how loans are priced.
Core inflation, which excludes volatile items, declined to 2.9 per cent in September from 3.0 per cent the month prior, helped by falling processed food prices, particularly maize flour. Meanwhile, non-core inflation rose to 9.6 per cent from 9.2 per cent, driven largely by rising prices of vegetables such as tomatoes, onions and cabbage.
Some economists see risks ahead. The country’s public debt burden remains high, and the government has been using bond buybacks and other strategies to manage refinancing pressure. Meanwhile, global uncertainties—such as tightening foreign monetary conditions, rising commodity prices, and geopolitical tensions—could test Kenya’s macroeconomic resilience.
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