Hope for cheaper loans as MPC lowers signal rate to 10.75 per cent
Dr Thugge said the MPC noted that the reduction in the CRR will release additional liquidity to banks.

The Monetary Policy Committee (MPC) has lowered the Central Bank Rate (CBR) by 50 basis points to 10.75 per cent at a meeting held today.
According to the Central Bank of Kenya Governor Dr Kamau Thugge, the overall inflation has remained below the targeted rates of 5±2.5 percent, which is supported by low and stable core inflation, low energy prices inflation, and exchange rate stability.
Dr Thugge said the central banks in the major economies have continued to lower their interest rates, but at different paces. Further, the Committee noted that economic growth decelerated in 2024, and therefore there was scope for a further easing of the monetary policy stance to support economic activity, while ensuring exchange rate stability.
He said lowering the CBR by 50 basis points to 10.75 per cent from 11.25 percent and reducing the Cash Reserve Ratio (CRR) by 100 basis points to 3.25 percent from 4.25 percent, to complement the lowering of the CBR, and support lowering of lending rates.
Dr Thugge said the MPC noted that the reduction in the CRR will release additional liquidity to banks. This is expected to lower the cost of funds and lending rates, and support growth of credit to the private sector.
The committee observed that the CBR has been lowered substantially since the MPC Meeting of August 2024, yet lending rates have only declined marginally.
He said the banks are expected to take the necessary steps to lower their lending rates further, to stimulate growth in credit to the private sector, and support economic activity.
The committee also observed that since banks are implementing the Risk-Based Credit Pricing Model (RBCPM), CBK would undertake on-site inspection of banks to ascertain that they are reducing their interest rates in line with the RBCPM.
“Under the amendments to the Banking Act recently enacted by Parliament, any bank that has not passed on the benefits of reduced cost of funds to reduce lending rates, will be penalised in accordance with the law,” the committee observed.