Central Bank Lowers Lending Rate To 10%; Will Banks Comply?

The Central Bank of Kenya has lowered the benchmark lending rate by 75 basis points to 10 percent in a move expected to bring the cost of credit down. But will the stubborn Kenyan commercial banks comply? Banks have been reluctant to implement CBK’s directive.

This is the lowest rate since May 2023 and marks the fourth consecutive benchmark lending rate cut by the Monetary Policy Committee.

The move is expected to ease the cost of borrowing, offering relief to businesses and households as the central bank seeks to stimulate economic activity amid easing inflation.

“The Committee concluded that there was scope for a further easing of the monetary policy stance to stimulate lending by banks to the private sector and support economic activity, while ensuring exchange rate stability. Therefore, the Committee decided to lower the Central Bank Rate (CBR) by 75 basis points to 10.00 percent from 10.75 percent,” said the Central Bank in a statement.

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Kenya’s overall inflation stood at 3.6 percent in March 2025 compared to 3.5 percent in February and remained below the mid-point of the target range of 5±2.5 percent.

Core inflation increased to 2.2 percent in March from 1.9 percent in February, mainly on account of higher prices of processed food items. Non-core inflation declined to 7.4 percent in March from 7.7 percent in February, reflecting lower prices of food crops and related items, particularly vegetables.

Additionally, lower energy and utilities inflation continued to moderate non-core inflation, on account of lower electricity and pump prices.

Overall inflation is expected to remain below the mid-point of the target range in the near term, supported by a low core inflation, lower food inflation, stable energy prices inflation, and continued exchange rate stability.

The performance of the Kenyan economy slowed down in 2024, with real GDP estimated at 4.6 percent compared to 5.6 percent in 2023, mainly reflecting deceleration in growth in most sectors of the economy. Nevertheless, leading indicators of economic activity point to improved performance in the first quarter of 2025.

The performance of the economy is expected to pick up in 2025, with real GDP growth projected at 5.4 percent, supported by resilience of key service sectors and agriculture, expected recovery in growth of credit to the private sector, and improved exports. This outlook is subject to domestic and external risks.

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