Central Bank of Kenya(CBK) top policy organ, the Monetary Policy Committee(MPC) has lowered the Central Bank Rate(CBR) by 25 basis points to 8.75% at its February 10th 2026 meeting. This marks a record 10th consecutive time that the CBK is stepping on the monetary easing pedal, piling yet more pressure on banks to lower their lending rates.
Banks had lobbied for more time to switch their loan products to the KESONIA Overnight rate regime, a plea that the Central Bank of Kenya now appears to have ignored.
Why Central Bank of Kenya Made the Cut
Central Bank of Kenya made this decision encouraged by inflation rate which is subdued at 4.4%, well within the the monetary authority’s 2.5–7.5% target band, giving room for looser policy without risking price instability.
Central Bank of Kenya observed that private sector credit is growing at 6.4%, signalling moderate but steady demand for loans; lower rates are expected to further stimulate borrowing and investment.
Growth in credit to key sectors of the economy, particularly building and construction, trade and consumer goods remained strong in January 2026, reflecting improved demand for credit in line with declining interest rates. Average commercial bank lending rates stood at 14.8% in Janaury 2026 down from 15.0% in October 2025 and 17.2% in November 2024.
The rate corridor narrowed to ±50bps to better align the KESONIA overnight rate, improving policy transmission and ensuring market rates respond more effectively to the CBR.
According to analysts at Ketu Capital, Kenya’s economy shows signs of stability, and with global rates relatively firm, easing domestic rates helps maintain attractive financing conditions for businesses and households.
In essence, the cut aims to sustain credit growth, support economic activity, and ensure liquidity in the financial system, while keeping inflation expectations anchored.
Central Bank of Kenya CEOs and Market Perception Survey Findings in January
The CEOs Survey and Market Perception Survey conducted in January 2026 point at sustained optimism about business activity and economic growth prospects for the next 12 months. These surveys attribute the rosy picture to low inflation, a stable Kenya Shilling US Dollar Exchange rate, with favourable weather conditions, low interest rates, increased infrastructure spending, digital innovations and improved private sector credit growth.
However, CEOs are still concerned about low consumer demand, high cost of doing business and increased global uncertainties attributed to higher tariffs and geopolitical tensions.
A recent proposal to remove those salaried earning less than KSh 30,000 per month is expected to spur consumer spending especially by low-income households, providing some stimulus to production.
Kenya’s inflation rate has slowed in the last few months to 4.4% from 4.5% in December, driven by a decline in the prices of vegetables and tomatoes and processed food items especially maize flour, a constant feature on the dinner table of many households in Kenya.
Kenya’s exports according to CBK figures increased by 6.1% driven by horticulture, coffee, tea, manufactured goods and apparel. The country’s import bill on the other hand rose 9.1% reflecting import of intermediate and capital goods.
Central Bank of Kenya Expects Dry Weather to Spike Food Prices
While inflationary pressure remains low, CBK survey shows that majority of respondents expect season factors associated with the current dry weather conditions before the onset of rains, to push up prices of food items especially vegetables.
CBK expects the country’s current account deficit to remain stable at 2.2% of GDP in 2026 and 2027 and be more likely fully financed by financial account inflows.
Currently, the CBK foreign exchange reserves stand at US$ 12,458 Million (5.37 months of import cover) and continues to provide a buffer against short-term domestic and external shocks.
A reduction in non-performing loans has been noted in the real estate sector, manufacturing, trade, building and construction as well as personal and household sectors. NPLs ratio to gross loans in the banking sector fell to 15.5% in January from 16.7% in October 2025 and 17.6% in August last year.
ALSO READ: Will CBK Make Another Rate Cut in February Meet?
Leave a comment