The Central Bank of Kenya (CBK) has lowered the Central Bank Rate (CBR) again, marking the 10th straight cut since August 2024.
In a press release on Tuesday, February 10, CBK said that it lowered its benchmark lending rate by 25 basis points to 8.75 per cent from 9.00 per cent.
The lowering, which signals a continued shift toward a more accommodative monetary policy stance aimed at supporting credit growth and economic activity, follows the MPC meeting held on Tuesday.
“Having considered these developments, the Committee therefore concluded that there was scope for a further easing of the monetary policy stance by reducing the CBR by 25 basis points.”
CBK said that this will 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.
At the same time, the MPC noted that the revised Risk-Based Credit Pricing Model (RBCPM), set to become fully operational by March 2026, is expected to strengthen transmission of monetary policy decisions and improve loan pricing transparency.
Additional CBK policy measures
To enhance the effectiveness of monetary policy transmission, the Committee approved narrowing the interest rate corridor around the CBR to +50 basis points from ±75 basis points and adjusted the Discount Window rate to 50 basis points above the CBR.
The Committee noted that Kenya’s inflation continued to ease, with overall inflation declining to 4.4 percent in January 2026 from 4.5 percent in December 2025, remaining below the midpoint of the target range.
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Non-core inflation also fell, largely due to lower vegetable prices, while core inflation edged slightly higher, driven by increases in some processed food items, particularly maize flour.
The MPC expects inflation to remain below the midpoint of the target range in the near term, supported by stable energy prices, processed food prices, and exchange rate stability.
Kenya’s economic performance remained resilient, with real GDP growing by 4.9 percent in the third quarter of 2025.
In addition, the economy is projected to expand by 5.5 percent in 2026 and 5.6 percent in 2027, supported by strong services activity, recovery in the industrial sector, and stable agricultural growth, although risks remain from adverse weather, global uncertainty, and geopolitical tensions.
Global conditions and external position
Growth remained resilient at 3.3 percent in 2025 gobally and is expected to remain steady in 2026, supported by improved financial conditions and investment in Artificial Intelligence-led technologies.
However, weak global demand, trade uncertainty, and geopolitical tensions — including the Russia-Ukraine conflict and Middle East instability — remain key risks.
Kenya’s current account deficit stood at 2.4 percent of GDP in 2025 and is projected to remain stable at about 2.2 percent of GDP in 2026 and 2027, supported by stronger exports and financial inflows.
“Currently, the CBK foreign exchange reserves stand at USD 12,458 million (5.37 months of import cover), and continue to provide adequate cover and a buffer against short-term domestic and external shocks,” the press release reads in part.
“The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios. The ratio of gross non-performing loans (NPLs) to gross loans stood at 15.5 percent in January 2026, down from 16.7 percent in October 2025 and 17.6 percent in August 2025.”
Private sector credit growth improved to 6.4 percent in January 2026, supported by lower lending rates and stronger demand, particularly in construction, trade, and consumer durables. Average commercial lending rates fell to 14.8 percent, down from 17.2 percent in late 2024.
Bankers call for benchmark rate to be retained
The lowering of the CBR comes after the Kenya Bankers Association (KBA) urged CBK to maintain the existing monetary policy stance, arguing that previous rate cuts were still filtering through the economy and financial system.
In its pre-MPC assessment on Monday, the bankers pointed to five key economic signals shaping the policy environment.
They noted that although inflation remained within the target range, upside risks persisted, particularly from food supply pressures.
At the same time, KBA highlighted that economic growth was showing resilience, supported by gradual improvement in credit supply, though vulnerabilities remained.
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“Third, domestic interest rates continue declining and yet to reflect the full transmission of previous successive cuts in the Central Bank Rate. Fourth, the private sector credit growth edging upwards, though cautiously, as banks watch the evolution of nonperforming loans in key sectors.”
KBA further noted that the exchange rate remained stable, supported by a manageable current account deficit, steady diaspora remittances, and strong foreign exchange reserves.
Given these conditions, the bankers had argued that holding the CBR steady would allow smooth transmission of earlier policy easing and support the ongoing transition to the revised Risk-Based Credit Pricing Model, expected to be fully implemented by the end of February 2026.
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