The Central Bank of Kenya (CBK) has cut the Central Bank Rate to 9 per cent from 9.25 per cent.
The Monetary Policy Committee decided on December 9, 2025, saying the adjustment is meant to support economic growth and motivate commercial banks to increase lending to the private sector.
The Committee explained that the move is part of efforts to keep the economy on a steady path while maintaining price stability.
During the meeting, the MPC noted that global growth has remained strong throughout 2025. The pace of expansion is estimated at 3.2 per cent, driven mostly by solid performance in major economies.
The United States has especially benefited from better financial conditions and firm spending by consumers and businesses. The Committee, however, expects global growth to slow slightly to 3.1 per cent in 2026 because of higher trade tariffs.
The MPC pointed out several risks that could weigh on global performance. These include weak global demand, ongoing trade uncertainties, and geopolitical tensions.
The Committee mentioned conflicts in the Middle East and in the Russia-Ukraine region, warning that these situations continue to affect global markets and investor confidence.
Although global inflation has eased in recent months, the MPC reported that it remains above target in some major economies.
Prices are expected to fall further in 2025 and 2026 because of lower energy costs and a general decline in demand. Central banks in large economies are also gradually loosening their monetary policies, although they are doing so with caution.
On commodity prices, the Committee observed that international oil prices have remained unpredictable even though they have moderated. Food inflation has eased as well, helped by falling prices of cereals, sugar, and edible oils.
Kenya’s inflation has stayed within a comfortable range. Overall inflation was 4.5 per cent in November 2025, down from 4.6 per cent in October. This level remains below the midpoint of the five per cent target.
Core inflation also dropped to 2.3 per cent from 2.7 per cent, which the MPC linked to lower prices of processed foods, including maize flour and sugar. Non-core inflation rose slightly to 10.1 per cent from 9.9 per cent because tomatoes, onions, cabbage, and other vegetables became more expensive.
The MPC said it expects inflation to stay below the midpoint of the target in the short term. It attributed this outlook to stable energy prices, a steady exchange rate, and lower costs of processed foods.
The MPC described Kenya’s economic performance in the first half of 2025 as resilient. Real GDP grew by an average of 4.9 per cent.
Growth was supported by strong activity in the industrial sector, steady output in agriculture, and a firm
recovery in services. The Committee projects that economic activity will rise to 5.2 per cent in 2025 and 5.5 per cent in 2026. According to the MPC, the improvement will be driven by continued recovery in agriculture, industry, and services. The main risks to this outlook include unpredictable weather, global trade tensions, and geopolitical conflict.
The current account deficit widened to 2.2 per cent of GDP in the 12 months to October 2025, compared to 1.5 per cent in 2024.
The MPC explained that the increase came mainly from higher imports of intermediate and capital goods. Exports grew by 6.7 per cent, supported by horticulture, coffee, manufactured products, and apparel.
Services receipts and diaspora remittances also went up. The Committee said the balance of payments is expected to stay positive. The CBK currently holds foreign exchange reserves worth Ksh 1.56 trillion, which can cover 5.25 months of imports.
The Committee stated that Kenya’s banking sector remains stable, with strong liquidity and healthy capital levels. Non-performing loans dropped to 16.5 per cent in November from 16.7 per cent in October. Lending to the private sector increased to 6.3 per cent. The MPC said the rise shows that demand for credit is improving and that lending rates are becoming more favourable.
The Committee also highlighted the upcoming full rollout of the Risk-Based Credit Pricing Model in March 2026. The MPC said the model will promote transparency and strengthen the transmission of monetary policy.
In its conclusion, the MPC reaffirmed its commitment to supporting economic recovery and maintaining price stability. The Committee said, “We will continue to monitor domestic and global developments and take appropriate actions to ensure that inflation remains stable and the economy stays on a sustainable growth path.”
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