CBK cuts rate to 10pc to spur credit growth, support economy

NAIROBI, Kenya, Apr 8 – The Central Bank of Kenya (CBK) has lowered its benchmark lending rate by 75 basis points to 10.00 percent, citing easing inflation, a stable exchange rate, and the need to stimulate private sector lending amid subdued credit growth.

The decision was reached during the Monetary Policy Committee (MPC) meeting held Monday, as the regulator reviewed previous policy outcomes and measures to support price stability and economic recovery.

“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,” CBK Governor and MPC Chairman Dr. Kamau Thugge said in a statement.

The MPC noted that overall inflation stood at 3.6 percent in March, well within the CBK’s target range of 5 and 2.5 percent, driven by lower food and energy prices. Core inflation also remained low at 2.2 percent, while non-core inflation eased further to 7.4 percent.

Kenya’s economy slowed to 4.6 percent in 2024 from 5.6 percent in 2023, but is expected to rebound to 5.4 percent in 2025, supported by agriculture, services, and improved credit flow.

The MPC cited favorable weather, macroeconomic stability, and increasing exports as key growth drivers.

Surveys by the CBK in March revealed growing optimism among CEOs and market participants, with expectations of improved business activity over the next 12 months.

However, concerns remain over weak consumer demand and high operating costs.

Revised balance of payments data by the Kenya National Bureau of Statistics (KNBS) showed the current account deficit narrowed to 3.1 percent of GDP in the 12 months to February 2025. Goods exports rose 13.1 percent, while diaspora remittances increased by 14.5 percent.

The current account deficit is projected to shrink further to 2.8 percent this year.

CBK’s foreign exchange reserves stood at $9.93 billion (4.44 months of import cover), offering a buffer against external shocks.

The banking sector remains stable, with strong liquidity and capital buffers, though the gross non-performing loans (NPL) ratio rose to 17.2 percent in February from 16.4 percent in December.

Private sector credit grew marginally by 0.2 percent in March, reversing a 1.3 percent contraction in February, as interest rates declined.

Average commercial lending rates fell to 15.8 percent in March from 17.2 percent in November 2024, partly due to the appreciation of the Kenyan Shilling and easing inflation expectations.

The MPC said it will continue monitoring domestic and global developments and stands ready to take further action if necessary. The next meeting is scheduled for June 2025.