The Central Bank of Kenya (CBK) has lowered its benchmark lending rate by 25 basis points to 8.75 per cent, signalling a further easing of monetary policy as inflation remains subdued and economic growth shows signs of resilience.
The decision was taken by the Monetary Policy Committee (MPC) at its meeting held on February 10, 2026, where members reviewed global and domestic economic developments and concluded that there was room to support economic activity while keeping inflationary pressures in check.
“The Monetary Policy Committee decided to lower the Central Bank Rate by 25 basis points to 8.75 per cent from 9.00 per cent,” the CBK said in a statement following the meeting.
The MPC noted that global economic growth has remained resilient, estimated at 3.3 per cent in 2025, supported by improved financial conditions, strong consumer spending and increased investment in artificial intelligence-led technologies, particularly in the United States.
The outlook for 2026 has been revised upwards, with growth expected to remain steady at 3.3 per cent, driven by improved prospects in the United States, the Euro area and China.
However, the Committee cautioned that weak global demand, trade policy uncertainty and heightened geopolitical tensions remain key risks.
On inflation, the MPC observed a continued easing trend both globally and domestically.
Kenya’s overall inflation declined to 4.4 per cent in January 2026 from 4.5 per cent in December 2025, remaining below the midpoint of the target range of 5±2.5 per cent.
Non-core inflation fell to 10.3 per cent, reflecting lower prices of vegetables such as tomatoes and onions, while core inflation edged up slightly to 2.2 per cent, driven by higher prices of some processed foods, particularly maize flour.
“Overall inflation is expected to remain below the midpoint of the target range in the near term,” the MPC said, citing stable energy prices, processed food prices and a stable exchange rate as key supporting factors.
The Committee reported that Kenya’s economy remained resilient in the third quarter of 2025, recording real GDP growth of 4.9 per cent, supported by a rebound in the industrial sector and the continued strength of services.
Economic growth for 2025 is estimated at 5.0 per cent, slightly lower than earlier projections due to slower agricultural performance, but is expected to pick up to 5.5 per cent in 2026 and 5.6 per cent in 2027.
The MPC also highlighted improving conditions in the banking sector. Gross non-performing loans declined to 15.5 per cent in January 2026 from 17.6 per cent in August 2025, while growth in private sector credit improved to 6.4 per cent.
Average commercial bank lending rates fell to 14.8 per cent, reflecting easing monetary conditions.
To strengthen policy transmission, the Committee approved a narrowing of the interest rate corridor around the CBR from ±75 basis points to ±50 basis points and adjusted the Discount Window rate accordingly.
It also noted that the revised Risk-Based Credit Pricing Model, expected to be fully operational by March 2026, would enhance transparency in loan pricing.
“Having considered these developments, the Committee therefore concluded that there was scope for a further easing of the monetary policy stance,” the CBK said, adding that the move aims to stimulate lending to the private sector while keeping inflation expectations anchored.
The MPC said it will continue to closely monitor global and domestic economic developments and stands ready to take further action in line with its mandate when it meets again in April 2026.
