CBK lowers benchmark lending rate to 9 per cent
By Kenneth Mwenda, December 9, 2025The Central Bank of Kenya (CBK) has lowered the Central Bank Rate (CBR) by 25 basis points to 9.00 percent from 9.25 percent. The decision was made by the Monetary Policy Committee (MPC) during its meeting on December 9, 2025. The move aims to support economic growth and encourage commercial banks to lend more to the private sector.
The MPC noted that global growth remains strong, with an estimated rate of 3.2 percent in 2025. Growth in major economies, particularly the United States, benefits from improved financial conditions and strong consumer and business spending.
However, global growth is expected to slow slightly to 3.1 percent in 2026 due to higher trade tariffs. The Committee identified weak global demand, trade uncertainties, and geopolitical tensions, including conflicts in the Middle East and Russia-Ukraine, as risks to economic growth.
Global inflation has eased modestly but remains above target in some major economies. Prices are expected to decline in 2025 and 2026 due to lower energy costs and reduced demand. Central banks in major economies continue to ease monetary policies cautiously.
International oil prices remain volatile despite a moderation in prices, while food inflation has declined, driven by lower cereal, sugar, and edible oil prices.
Inflation and growth
In Kenya, overall inflation fell to 4.5 percent in November 2025 from 4.6 percent in October, staying below the mid-point of the target range of 5±2.5 percent. Core inflation dropped to 2.3 percent from 2.7 percent, largely due to lower prices of processed foods such as maize flour and sugar.
Non-core inflation rose slightly to 10.1 percent from 9.9 percent, pushed by higher prices of vegetables, particularly tomatoes, onions, and cabbages. The MPC expects inflation to remain below the target midpoint in the near term, supported by stable energy prices, exchange rate stability, and lower processed food costs.
Kenya’s economy showed resilience in the first half of 2025, with real GDP growth averaging 4.9 percent. Growth was supported by strong performance in the industrial sector, stable agricultural output, and a resilient service sector.
Economic activity is projected to rise to 5.2 percent in 2025 and 5.5 percent in 2026, driven by continued recovery in industry, agriculture, and services. Risks include adverse weather, trade uncertainties, and global geopolitical tensions.
The current account deficit widened to 2.2 percent of GDP in the 12 months to October 2025, up from 1.5 percent in 2024, mainly due to higher imports of intermediate and capital goods. Exports rose by 6.7 percent, led by horticulture, coffee, manufactured goods, and apparel.
Services receipts and diaspora remittances also increased. The overall balance of payments is expected to remain positive, with CBK holding foreign reserves of Ksh1.56 trillion, enough to cover 5.25 months of imports.
The MPC highlighted the stability of the banking sector, with adequate liquidity and capital ratios. Non-performing loans fell to 16.5 percent in November from 16.7 percent in October. Lending to the private sector rose to 6.3 percent, reflecting stronger demand for credit and lower lending rates.
The Committee also noted the upcoming full implementation of the Risk-Based Credit Pricing Model in March 2026, which will enhance transparency and improve monetary policy transmission.