CBK Lowers Lending Rates for All Kenyan Banks Again

The Central Bank of Kenya (CBK) has lowered the Central Bank Rate (CBR) by 25 basis points to 9.50 percent from 9.75 percent, marking the seventh consecutive cut in one year.

The cut in the CBR means Kenyan banks are expected to reduce their lending rates further, lowering the cost of loans for businesses and households.

According to a report from the committee on Tuesday, August 12, the Monetary Policy Committee (MPC) made the decision during its meeting on Monday, August 12, 2025. 

Further, the decision was made to stimulate lending by commercial banks to the private sector and boost economic growth.

CBK Governor Dr. Kamau Thugge, who chairs the MPC, said the cut builds on earlier monetary policy actions and is designed to keep inflation expectations anchored while maintaining exchange rate stability.

Having considered these developments, the Committee therefore concluded that there was scope for a further easing of the monetary policy stance to 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.

Also Read: CBK Fines 11 Banks Ksh191 Million for Breaking the Law

Kenya’s Economic Performance 

Domestically, Kenya’s overall inflation stood at 4.1 percent in July, up from 3.8 percent in June. 

Additionally, core inflation rose to 3.1 percent from 3.0 percent in June because of higher prices of processed foods such as sugar and maize flour.

Non-core inflation climbed to 7.2 percent in July from 6.2 percent in June due to higher energy prices.

The MPC expects inflation to remain within the target range in the near term, supported by lower food prices, stability in energy costs, and a steady exchange rate.

At the same time, economic growth figures for the first quarter of 2025 showed real GDP expanded by 4.9 percent, driven by strong performance in agriculture, a recovery in industrial activity including construction, and resilience in the services sector.

The CBK projects GDP growth to accelerate to 5.2 percent in 2025 and 5.4 percent in 2026, with continued good weather, strong performance in agriculture, and ongoing recovery in manufacturing and construction.

Banking Sector Remains Stable

The banking sector continues to be stable as non-performing loans (NPLs) stood at 17.6 percent in June, unchanged from April.

However, reductions were recorded in building and construction, personal loans, and manufacturing, though trade and tourism-related sectors saw increases.

Private sector credit growth improved to 3.3 percent in July from 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 eased to 15.2 percent in July from 15.3 percent in June and 17.2 percent in November 2024. 

“This mainly reflects improved demand in line with the declining lending interest rates. Average commercial banks’ lending rates declined to 15.2 percent in July 2025 from 15.3 percent in June, and 17.2 percent in November 2024,” the report noted.

Also Read: List of 10 Largest Banks in Kenya by Market Share

CBK Explains Reason for the Cut

The MPC noted that the global economic growth outlook for 2025 has been revised upwards to 3.0 percent from 2.8 percent.

The improvement is driven by upward revisions in growth forecasts for the United States and China, owing to lower effective tariff rates on trade and improved financial conditions.

However, the committee warned that uncertainties remain high because of trade policy risks, geopolitical tensions in the Middle East, and the prolonged Russia-Ukraine conflict.

On the other hand, global inflation is projected to ease in 2025, due to falling energy prices and subdued global demand. Meanwhile, food prices remain elevated, especially edible oils, while cereals and sugar prices remain relatively stable.

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