CBK Reduces Lending Rates to 8.75 Percent to Boost Credit Growth
The Central Bank of Kenya (CBK) has lowered its benchmark lending rate in a move aimed at stimulating private-sector credit and sustaining economic momentum, as inflation remains within the target range and growth prospects stay positive.
In a decision announced after its latest sitting, the Monetary Policy Committee (MPC) reduced the Central Bank Rate (CBR) by 25 basis points to 8.75 per cent from 9.00 per cent. The resolution was made during the MPC meeting held on February 10, 2026, signaling continued monetary easing to support economic activity.
“The Monetary Policy Committee decided to lower the Central Bank Rate by 25 basis points to 8.75 percent from 9.00 percent during its meeting held on February 10, 2026,” the CBK chair said in a statement.
The rate cut comes against a backdrop of easing inflationary pressures. According to CBK data, overall inflation declined to 4.4 per cent in January 2026, marginally lower than the 4.5 per cent recorded in December 2025. This remains below the midpoint of the government’s inflation target of 5 per cent, with a tolerance band of plus or minus 2.5 per cent.
Non-core inflation, largely influenced by food prices, eased to 10.3 per cent, reflecting improved supply conditions and favourable weather. However, core inflation—excluding food and fuel—rose slightly to 2.2 per cent, attributed to higher prices for some processed food items. The MPC noted that inflation is expected to remain stable in the near term, supported by stable energy prices, a steady exchange rate, and positive weather conditions.
“Inflationary pressures remain contained, and the outlook is stable, supported by favourable domestic and external conditions,” the committee observed.
Kenya’s economic performance also informed the decision. Real Gross Domestic Product (GDP) growth is estimated at 5.0 per cent in 2025, with the industrial and services sectors continuing to demonstrate resilience. Agriculture, which has faced weather-related challenges in recent years, is projected to recover gradually.
Looking ahead, the CBK forecasts economic growth of 5.5 per cent in 2026 and 5.6 per cent in 2027, contingent on favourable weather, sustained private-sector activity, and improved industrial output.
The central bank further noted positive trends in private-sector credit uptake. Lending to the private sector grew by 6.4 per cent in January 2026, driven largely by demand in building and construction, trade, and consumer durables. At the same time, average commercial bank lending rates declined to 14.8 per cent, down from 15.0 per cent in October 2025.
“The reduction in the CBR is expected to further lower lending rates and enhance access to credit for businesses and households,” the CBK stated.
To improve the effectiveness of monetary policy transmission, the MPC also approved structural adjustments to the policy framework. These include narrowing the interest rate corridor around the CBR from plus or minus 75 basis points to plus or minus 50 basis points, and setting the Discount Window rate at 50 basis points above the CBR.
In addition, the CBK confirmed that full implementation of the Risk-Based Credit Pricing Model (RBCPM) will take effect in March 2026. The model is expected to enhance transparency in loan pricing and align borrowing costs more closely with individual risk profiles.
The latest adjustment marks the 10th consecutive reduction in the benchmark rate, following a cut to 9.0 per cent in December 2025, underscoring the central bank’s sustained efforts to stimulate credit growth and support economic recovery.
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CBK Reduces Lending Rates to 8.75 Percent to Boost Credit Growth
