MPC lending rate cuts for the sixth time signalpush to spur growth
It said average lending rates in the domestic market have continued to decline, while private sector credit growth has recovered modestly
The Monetary Police Committee (MPC) has for the sixth time in a row cut the Central Bank Rate (CBR) by 25 basis points to 9.75 per cent from 10.00 per cent.
It said the move is aimed at stimulating lending by banks to the private sector and supporting economic activity, while ensuring inflationary expectations remain firmly anchored, and the exchange rate remains stable.
In reaching the decision, the MPC, which is chaired by Central Bank Governor Dr Kamau Thugge, noted that overall inflation was expected to remain below the midpoint of the 5±2.5 per cent target range in the near term.
It further noted that central banks in the major economies have continued to lower their interest rates, but
at a more cautious pace depending on inflation and economic growth expectations.
At the same time, it said average lending rates in the domestic market have continued to decline, while private sector credit growth has recovered modestly.
In further lowering the CBR, the MPC said it will closely monitor the impact of the policy decision as well as developments in the global and domestic economy and stands ready to take further action as necessary in line
with its mandate.
The committee will meet again in August 2025.
The MPC has been lowering the CBR since August last year in a push to encourage banks to lower their lending rates to enhance credit access to the private sector.
At its meeting, it noted that growth in commercial bank lending to the private sector stood at 2.0 percent in May
2025 compared to 0.4 per cent in April, and -2.9 per cent in January 2025.
This reflects improved demand in line with the declining lending interest rates, and dissipation of exchange rate valuation effects on foreign currency denominated loans following the appreciation of the Shilling. Average commercial banks’ lending rates declined to 15.4 per cent in May 2025, from 15.7 per cent in April and 17.2 per cent in November 2024.
The committee also noted the ongoing implementation of the FY2024/25 Supplementary Budget II, and the proposed Budget for FY2025/26, which continue to reinforce the fiscal consolidation over the medium term, and thereby reduce debt vulnerabilities.
