Kenya’s top bankers want the Central Bank of Kenya (CBK) to cut borrowing costs to make credit cheaper and jumpstart growth.
The Kenya Bankers Association (KBA) states that the country’s economic and financial indicators are robust enough to support a cautious reduction of the Central Bank Rate (CBR).
“With inflation low and stable, the economy growing at 5.0 per cent in Q2, private sector credit growth still under pressure, and the shilling steady due to strong reserves and remittances, a cautious cut in interest rates could help encourage lending and foster stronger growth,” the KBA Centre for Research on Financial Markets and Policy said on October 2.
The call comes days before the Monetary Policy Committee (MPC) meets on October 7 to decide whether to adjust interest rates.
KBA believes that with inflation under control and the shilling stable, lowering the CBR would ease the cost of borrowing for households and businesses, encouraging more lending by banks.
“In view of low inflation and well-anchored inflation expectations, and stability in the exchange rate, the need to stimulate credit growth to support economic activity becomes paramount,” the association noted in its research.
Kenya’s economy has shown resilience despite global challenges. Growth stood at 5.0 per cent in the second quarter of 2025, although analysts warn that weaker demand could slow expansion in the third quarter.
Inflation has also remained within target. Overall inflation edged up slightly to 4.6 per cent in September, from 4.5 per cent in August, mainly due to seasonal food price hikes.
Non-core inflation climbed to 9.6 per cent from 9.2 per cent in August, while core inflation, which reflects demand pressures, eased slightly to 2.9 per cent from 3.0 per cent.
“Core inflation, which reflects demand conditions in the economy, eased slightly to 2.9 per cent in September from 3.0 per cent in August,” KBA said.
Global factors still pose risks. The association pointed to rising oil prices, prolonged geopolitical tensions and U.S. trade policies as ongoing threats that could drive up import costs for Kenya.
“Other risks of higher inflation are associated with the sticky U.S. inflation that continues to exert pressure on import costs for Kenya. Going forward, S&P Global Market Intelligence forecasts Kenya’s inflation to average 4.1 per cent in 2025, 4.8 per cent in 2026 and 4.3 per cent in 2027, remaining moderate but vulnerable to external shocks,” the report stated.
Private sector credit growth has started to recover after months of weakness, rising to 3.3 per cent in August from a 2.9 per cent contraction in January.
But KBA warned that rising non-performing loans, which reached 17.6 per cent by June, remain a concern.
The shilling’s stability is another factor backing a possible rate cut. The local currency traded at an average of Ksh 129.24 to Ksh 129.26 per dollar in September, supported by foreign exchange reserves of USD 10.7 billion, enough to cover 4.7 months of imports. Remittances also grew by 3.91 per cent in August. Medium-term forecasts show the shilling could gradually weaken to around Ksh 133.59 by the end of the year.
