The Central Bank of Kenya (CBK) has lowered its lending rate (CBR) by 25 basis points, bringing it down to 9.25% from 9.50%.
In a statement following its Monetary Policy Committee (MPC) meeting on October 7, 2025, the Central Bank of Kenya (CBK) announced that the decision was reached after careful consideration of both domestic and global economic developments.
“The Monetary Policy Committee (MPC) decided to lower the Central Bank Rate (CBR) by 25 basis points to 9.25 percent from 9.50 percent, during its meeting held on October 7, 2025,” read the statement.
According to the MPC, the Committee concluded that there was room to ease monetary policy further by lowering the CBR by 25 basis points, in order to stimulate private sector lending and support economic growth, while maintaining stable inflation expectations and the exchange rate after considering prevailing economic conditions.
CBK Global and Domestic Economic Outlook
The MPC noted that global growth has remained resilient in 2025, supported by early exports to the United States, improved financial conditions, and strong consumer spending.
However, growth is expected to slow in 2026 due to higher tariffs, weak global demand, and geopolitical tensions, including the Russia-Ukraine conflict and instability in the Middle East.
Global inflation has risen modestly, driven by higher food prices and tariffs, but is projected to decline in 2025–2026 as energy prices fall and demand slows. Central banks in major economies remain cautious in cutting interest rates.
Oil prices have moderated but remain volatile, while food inflation has eased for cereals and sugar but remains high for edible oils.
Domestically, Kenya’s overall inflation stood at 4.6 percent in September 2025, slightly up from 4.5 percent in August, and remained below the midpoint of the target range of 5±2.5 percent. Core inflation fell to 2.9 percent due to lower prices for processed food, particularly maize flour.
“Non-core inflation increased to 9.6 percent in September from 9.2 percent in August, mainly driven by higher prices of vegetables, particularly tomatoes, carrots, onions, and cabbage. Overall inflation is expected to remain below the midpoint of the target range in the near term, supported by stable energy prices and continued exchange rate stability,” read the statement.
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Economic Performance and Outlook
Kenya’s economy continued to show resilience in Q2 2025, with real GDP growing 5.0 percent compared to 4.6 percent in Q2 2024. This growth was supported by rebounds in the industrial sector, stable agricultural production, and strong performance in key services, including transport, finance, ICT, and wholesale and retail trade.
The economy is projected to grow by 5.2% in 2025 and 5.5% in 2026, with risks including global trade uncertainties and geopolitical tensions.
The September 2025 Agriculture Sector Survey indicated that the harvest season for key crops, stable fuel prices, and a stable exchange rate are expected to support a stable inflation rate, although seasonal price increases in vegetables may exert moderate upward pressure.
“Respondents to the September 2025 Agriculture Sector Survey expect the onset of the harvest season for key crops particularly maize, stable fuel prices, and exchange rate stability to support,” read part of the statement.
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Current Account and Banking Sector
At the same time, exports grew by 3.6 percent, driven by horticulture, coffee, manufactured goods, and apparel, while imports rose by 9.2 percent.
The banking sector remains stable, with strong liquidity and capital adequacy ratios. Gross non-performing loans (NPLs) fell to 17.1 percent in September from 17.6 percent in June, mainly in construction, real estate, tourism, hotels, and trade.
“Growth in commercial banks’ lending to the private sector continued to improve and stood at 5.0 percent in September 2025 compared to 3.3 percent in August, and -2.9 percent in January 2025,” read the statement.
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