Kenyan borrowers are set for a fresh shift in the cost of accessing bank credit as the country’s monetary policy outlook remains under close watch.
In a statement on October 7, the Central Bank of Kenya (CBK) said it had retained the Central Bank Rate (CBR) at 8.75 per cent, with the Monetary Policy Committee (MPC) making the decision at its meeting on Wednesday.
This marks the fourth consecutive MPC meeting in which the benchmark rate has remained unchanged.
“The Monetary Policy Committee (MPC) decided to maintain the Central Bank Rate (CBR) at 8.75 percent, during its meeting held on October 7, 2026,” read part of the statement.
CBK data shows that the average commercial banks’ lending rate stood at 14.4 per cent in September, compared with 14.3 per cent in August. Despite the marginal increase, the September rate remained below the 17.2 per cent recorded in November 2024.
The movement means that while borrowers have faced a slight increase in the average cost of bank credit in recent weeks, lending rates remain substantially lower than they were before the recent easing cycle.
Private Sector Credit Continues to Grow
Demand for credit remained robust, with growth in commercial banks’ lending to the private sector rising to 10.6 per cent in September from 10.3 per cent in August, according to the MPC.
That performance marks a significant turnaround from January 2025, when private sector credit contracted by 2.9 per cent.
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CBK attributed the expansion to increased borrowing across key sectors, including trade, building and construction, agriculture, finance and insurance, and consumer durables.
“The growth in credit to the private sector reflects strong demand supported by lending to various sectors of the economy,” the MPC said.
Growth in lending has been supported by the implementation of the Risk-Based Credit Pricing Model, which CBK said has continued to improve the transmission of monetary policy to lending rates.
The regulator lowered the Central Bank Rate (CBR) to 8.75 per cent from 9 per cent in February 2026 and has maintained it at that level in subsequent meetings.
CBK Reports Banks Record Improvement in Loan Performance
The quality of bank loans continued to improve, with the ratio of gross non-performing loans (NPLs) to gross loans falling to 13.9 per cent in September, from 14.8 per cent in June 2026 and 17.6 per cent in August 2025.
CBK attributed the improvement to lower bad loans in the financial services, agriculture, trade, and energy and water sectors, while noting that lenders have continued to make adequate provisions against potential losses.
“The banking sector remains stable and resilient, supported by adequate capital and liquidity buffers,” the MPC said.
CBK Keeps Rate at 8.75 Per Cent
The decision to retain the CBR came as inflation rose to 6.8 per cent in September from 6.6 per cent in August, pushing it closer to the upper limit of the government’s 2.5 to 7.5 per cent target range.
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Despite the increase, CBK said inflation is expected to remain within the target band in the near term, supported by exchange rate stability and a projected decline in food prices following forecasts of above-average rainfall between October and December.
The committee maintained that the current monetary policy stance remains sufficient to keep inflation expectations in check and preserve exchange rate stability.
“Having considered these developments, 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,” the MPC said.
Economic Outlook
CBK said Kenya’s external position remained strong, supported by foreign exchange reserves of $14.702 billion, equivalent to 5.9 months of import cover.
The current account deficit stood at 3.1 per cent of GDP in the 12 months to August 2026, compared with 2.1 per cent during a similar period in 2025. CBK attributed the increase to a wider trade deficit and lower secondary income transfers as a share of GDP.
Goods exports grew by 11.8 per cent, driven by horticulture, tea, machinery and transport equipment. Imports rose by 15.8 per cent, reflecting higher purchases of food, mineral fuels, intermediate goods and capital goods.
Services receipts increased by 8.7 per cent, mainly due to stronger travel earnings, while diaspora remittances declined by 1.3 per cent.
CBK projects the current account deficit at 3.2 per cent of GDP in 2026, up from 2.1 per cent in 2025, largely due to higher mineral fuel imports and lower remittance inflows.
The Monetary Policy Committee also noted the ongoing implementation of the 2026/27 Budget and plans to reduce debt vulnerabilities through fiscal consolidation over the medium term.
Members said they will continue monitoring global oil prices, potential effects on inflation, and developments in both the domestic and international economy ahead of the next MPC meeting scheduled for December 2026.
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