The Central Bank of Kenya (CBK) has explained why the Monetary Policy Committee (MPC) maintained the Central Bank Rate (CBR) over the last two meetings.
CBK Governor Kamau Thugge, while speaking during a Monetary Policy Committee (MPC) briefing on Wednesday, June 10, said the pause follows the introduction of the risk-based credit pricing model.
He added that the new framework has made it difficult at this stage to fully assess its impact on credit to the private sector.
“Since the risk-based credit pricing model came into place, the MPC has not changed the CBR, and it has been paused for the last two meetings of the MPC. So it is difficult to tell what impact that framework would have had on credit to the private sector,” he said.
CBK Paused Interest Rate Changes To Assess Impact Of New Lending Model
Thugge further said that MPC decisions on whether to tighten or ease monetary policy are based on data received during committee meetings, noting that it is still difficult to predict the direction of future policy moves at this stage.
The MPC, he added, is closely monitoring developments in food prices, which agricultural sector surveys suggest may be easing.
Also Read: Kenyans Face Higher Loan Costs as Bankers Push for CBK Rate Hike
He further noted that CBK is monitoring oil price movements and potential second-round effects on the economy, stressing that the MPC will review inflation trends at its next meeting before taking any policy action.
The risk-based credit pricing model, which was fully implemented in March 2026, is designed to improve the transmission of monetary policy and enhance transparency in loan pricing.
Under the framework, the total cost of credit is determined by the Kenya Shilling Overnight Interbank Average (KESONIA), a premium factor (K), and additional fees or charges.
CBK says the model is intended to make lending rates more responsive to changes in monetary policy.
Also Read: CBK Invites Kenyans with as Little as KSh50,000 to Invest in Treasury Bonds: How to Bid
CBK Says Earlier Rate Cuts Are Boosting Economy as Lending, Credit Growth Improve
Despite the pause in rate adjustments, the governor noted that earlier monetary easing measures undertaken before the pause have already delivered positive effects on the economy.
He highlighted that Treasury bill rates have declined significantly, while commercial bank lending rates have also dropped from 17.2 per cent to 14.5 per cent.
The governor said the objective of lowering the CBR was to stimulate credit to the private sector, adding that this goal is now reflected in improved lending activity.
He noted that private sector credit growth has recovered from a contraction of 2.9 per cent in January 2025 to a growth of 9.3 per cent in May 2026.
According to him, the new pricing framework is expected to strengthen the transmission of monetary policy by ensuring faster, more direct adjustments in lending rates when the CBR is tightened or eased.
He explained that under the model, any policy decision would have an immediate impact on commercial bank lending rates, either increasing or decreasing them more quickly than before.
The Committee decided to maintain the CBR at 8.75 percent, during its meeting held on June 9, 2026.
“Having considered these developments, including the potentially transitory nature of the conflict, the Committee concluded that the current monetary policy stance, with the Central Bank Rate unchanged at 8.75 percent, remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable,” read the briefing in parts.
