CBK Cuts Lending Rates for All Kenyan Banks Again

Central Bank of Kenya Cuts Interest Rates for the Seventh Time in a Year

The Central Bank of Kenya (CBK) has reduced the Central Bank Rate (CBR) by 25 basis points, bringing it down to 9.50 percent from 9.75 percent. This marks the seventh consecutive rate cut within the past year, signaling a continued effort to support economic growth and stability.

The decision to lower the CBR is expected to lead to further reductions in lending rates by Kenyan banks. This will help reduce the cost of borrowing for both businesses and households, making loans more accessible and affordable. The move aims to encourage increased lending and investment across various sectors of the economy.

The Monetary Policy Committee (MPC), which is responsible for setting monetary policy in Kenya, made this decision during its meeting on August 12, 2025. The committee emphasized that the reduction is intended to stimulate lending by commercial banks to the private sector and boost overall economic activity. By easing monetary policy, the CBK hopes to create a more favorable environment for business expansion and consumer spending.

Dr. Kamau Thugge, the Governor of the CBK and chair of the MPC, highlighted that the rate cut builds upon previous monetary policy actions. He stated that the move is designed to keep inflation expectations stable while maintaining exchange rate stability. The MPC concluded that there was room for further easing of monetary policy to support the economy, especially in the context of ongoing efforts to stimulate lending and economic growth.

Inflation and Economic Growth Trends

Domestically, Kenya’s overall inflation remained at 4.1 percent in July, slightly higher than the 3.8 percent recorded in June. Core inflation, which excludes volatile items like food and energy, rose to 3.1 percent from 3.0 percent in June. This increase was largely due to higher prices for processed foods such as sugar and maize flour. Meanwhile, non-core inflation, which includes energy and other essentials, climbed to 7.2 percent from 6.2 percent in June, driven by rising energy costs.

Despite these increases, the MPC remains confident that inflation will stay within the target range in the near term. This confidence is based on factors such as lower food prices, stable energy costs, and a steady exchange rate. The central bank expects these conditions to continue supporting price stability in the coming months.

Economic growth figures for the first quarter of 2025 showed a real GDP expansion of 4.9 percent. This growth was driven by strong performance in agriculture, a recovery in industrial activity—including construction—and resilience in the services sector. The CBK projects that GDP growth will accelerate to 5.2 percent in 2025 and 5.4 percent in 2026, supported by favorable weather conditions, continued agricultural productivity, and ongoing improvements in manufacturing and construction.

Banking Sector Stability and Lending Trends

The banking sector in Kenya remains stable, with non-performing loans (NPLs) standing at 17.6 percent in June, unchanged from April. However, there have been notable changes in different loan categories. Reductions were observed in building and construction, personal loans, and manufacturing, while trade and tourism-related sectors saw an increase in NPLs.

Private sector credit growth improved significantly in July, reaching 3.3 percent compared to 2.2 percent in June and a negative 2.9 percent in January. Key sectors benefiting from increased lending include manufacturing, trade, building and construction, and consumer durables.

Average lending rates by commercial banks also eased, dropping to 15.2 percent in July from 15.3 percent in June and 17.2 percent in November 2024. This decline reflects improved demand for loans as interest rates have decreased. The report noted that the drop in lending rates is consistent with the broader trend of easing monetary policy.

Global Economic Outlook and Challenges

The MPC also reviewed the global economic outlook, noting that growth projections for 2025 have been revised upward to 3.0 percent from 2.8 percent. This improvement is attributed to better growth forecasts for the United States and China, driven by lower tariff rates and improved financial conditions. However, the committee warned that uncertainties remain high due to trade policy risks, geopolitical tensions in the Middle East, and the prolonged conflict between Russia and Ukraine.

On the inflation front, global inflation is expected to ease in 2025 due to falling energy prices and subdued global demand. Food prices, however, remain elevated, particularly for edible oils, although cereals and sugar prices are relatively stable. These global trends will likely influence Kenya's economic performance and inflationary pressures in the coming months.