The Central Bank of Kenya (CBK) has reduced its benchmark lending rate by 25 basis points to 8.75 per cent, a move designed to encourage private sector borrowing and bolster economic expansion.
The decision, announced by the Monetary Policy Committee (MPC), follows assessments of sustained price stability, consistent economic growth, and a steady foreign exchange environment. In its statement, the committee highlighted that overall inflation had decreased to 4.4 per cent in January 2026 from 4.5 per cent in December 2025, remaining comfortably below the midpoint of the CBK’s target range of 5 per cent, plus or minus 2.5 percentage points.
The MPC projected that inflation would likely stay below the target midpoint in the near term, citing stable prices for processed food and energy, alongside exchange rate stability, as supporting factors.
This policy shift occurs against a backdrop of resilient economic performance. The CBK noted that real GDP growth reached 4.9 per cent in the third quarter of 2025, propelled by a recovery in the industrial sector and sustained strength in services. Looking ahead, the committee forecasts real GDP growth of 5.5 per cent for 2026 and 5.6 per cent for 2027. This outlook is underpinned by the continued robustness of the services sector, ongoing industrial recovery, and stable agricultural output, though the CBK warned that adverse weather conditions pose a lingering risk.
The MPC emphasized that it will maintain vigilant oversight of both domestic and international economic developments and is prepared to implement additional policy measures as required to ensure price stability and foster sustainable growth.
The rate cut signals the central bank’s confidence in the current disinflationary trend and its prioritization of growth support, while balancing the need to keep inflation anchored within the official target band. This adjustment is expected to lower borrowing costs across the economy, potentially stimulating investment and consumption.
