CBK lowers policy rate as shilling remains stable
By Faith Lagat, December 13, 2025The Central Bank of Kenya (CBK) has lowered the Central Bank Rate (CBR) by 25 basis points to 9.00 per cent from 9.25 per cent, signalling continued confidence in Kenya’s macroeconomic stability amid a stable shilling and a favourable inflation outlook.
The decision was made by the Monetary Policy Committee (MPC) during its meeting on December 9, 2025, citing easing inflationary pressures and improving private sector credit growth.
According to the CBK Weekly Bulletin released on December 11, 2025, “overall inflation was expected to remain below the midpoint of the 5±2.5 per cent target range in the near term, and growth in commercial banks’ lending to the private sector continued to improve in line with declining lending interest rates.”
The rate cut marks the latest step in a gradual monetary easing cycle as domestic price pressures remain contained despite ongoing global economic uncertainties. The MPC noted that “central banks in major economies had remained cautious in lowering interest rates, depending on their inflation and growth outlooks,” underlining Kenya’s comparatively stable position.
Shilling stability and strong reserves
The easing decision was supported by continued stability in the foreign exchange market.
“The Kenya shilling remained stable against major international and regional currencies during the week ending December 11, 2025,” the bulletin stated.
The currency traded at Ksh 129.16 per US dollar on December 11, compared to Ksh 129.41 on December 4, representing a marginal appreciation of 0.19 percent.
Kenya’s foreign exchange reserves remained strong, standing at USD 12,065 million as of December 10, equivalent to 5.24 months of import cover. This level comfortably exceeds the CBK’s statutory requirement of at least four months of import cover, providing the central bank with additional flexibility in managing monetary policy and external shocks.
Liquidity conditions
Liquidity in the money market remained ample during the review period, with commercial banks holding excess reserves averaging KSh 13 billion above the 3.25 per cent Cash Reserve Ratio requirement. Reflecting improved monetary policy transmission, the Kenya Shilling Overnight Interbank Average Rate (KESONIA) declined to 9.05 per cent on December 10 from 9.24 per cent on December 4.
The MPC also welcomed progress on structural reforms in the banking sector, noting that the revised banking sector Risk-Based Credit Pricing (RBCP) model, which will be fully operational by March 2026, will improve the transmission of monetary policy decisions to commercial banks’ lending interest rates and enhance transparency in the pricing of loans.
Market activity mirrored the accommodative stance, with interbank transactions rising to an average of 25 deals per day from 17 the previous week, while volumes increased to Ksh 12.9 billion from Ksh 11.8 billion.