The Central Bank of Kenya (CBK) has lowered its base lending rate to 10.00% — the lowest since May 2023, when it stood at 9.50%.
- •The Monetary Policy Committee (MPC) cut the Central Bank Rate (CBR) by 75 basis points.
- • It cited easing inflation, weak private sector credit, and a more stable exchange rate.
- •The Committee met on 8th April 2025 amid global risks, including geopolitical tensions and high oil prices.
Inflation rose slightly to 3.6% in March from 3.5% in February. Core inflation increased to 2.2%, while non-core inflation dropped to 7.4%. The CBK expects inflation to remain stable, helped by falling food prices and steady exchange rates.
Growth slowed in 2024, with GDP expanding by 4.6%, down from 5.6% the year before. However, the CBK projects 5.4% growth in 2025, driven by agriculture, services, and stronger exports.
To improve policy transmission, the MPC narrowed the interest rate corridor to ±75 basis points. It also cut the Discount Window rate to 75 basis points above the CBR.
Despite lower rates, private sector credit growth remained weak. Lending rose by 0.2% in March after contracting in February. Lending rates fell to 15.8% in March from 17.2% in November 2024.
The ratio of non-performing loans (NPLs) edged up to 17.2% in February 2025, from 16.4% in December 2024, reflecting repayment pressures in trade, building, and construction sectors.
Kenya’s external position strengthened. The current account deficit narrowed to 3.1% of GDP in the 12 months to February 2025. Exports rose, remittances increased, and oil imports fell. Foreign exchange reserves climbed to USD 9.93 billion, equal to 4.44 months of import cover.
The CBK said it will monitor conditions and adjust policy if needed. The next MPC meeting is scheduled for June 2025.
The rate cut signals a move to support growth while keeping inflation and the exchange rate in check.
