Kenya’s central bank has cut its benchmark lending rate to 9.75% from 10.00%, marking the sixth consecutive reduction in its monetary policy stance. The decision was announced by the bank’s Monetary Policy Committee on Tuesday, June 10, 2025.
The move aims to further stimulate lending by banks to the private sector and support overall economic activity. The central bank stated that there was “scope for a further easing of the monetary policy stance to augment the previous policy actions.”
This sustained easing comes as inflation in Kenya has remained below the central bank’s 5% midpoint target range. In May 2025, inflation eased to 3.8% from 4.1% in April, remaining well within the target range of 2.5% to 7.5%.
This benign inflation outlook, supported by stability in food and energy prices and a firm exchange rate, provided the central bank with room to lower borrowing costs.
Since August 2024, the Monetary Policy Committee has cumulatively lowered borrowing costs by 325 basis points. Economists had been divided on the central bank’s latest decision, with some forecasting a cut, others no change, and a few even predicting a hike.
The central bank now projects the Kenyan economy to grow at 5.2% in 2025, a slight downward revision from a previous forecast of 5.4%.
The current-account deficit is expected to remain stable at 1.5% of GDP in 2025, projected to be fully financed by financial-account inflows. The banking sector in Kenya remains stable, exhibiting strong liquidity and capital-adequacy ratios.
However, the ratio of non-performing loans saw a slight increase in April, rising to 17.6% from 17.2% in February, affecting sectors like trade, tourism, and hotels, as well as households.
The central bank’s decision reflects its continued commitment to supporting economic growth while maintaining price stability in the face of various domestic and global economic factors.
