Central Bank MPC meets tomorrow to decide the benchmark lending rates
Cytonn Investments expects the MPC to cut the CBR by 50 basis points to 100 basis points to within a range of 10.25% - 10.75%.

The Central Bank Monetary Policy Committee (MPC) will meet tomorrow amid claims by many stakeholders that the signal rate would be reduced.
So far, Kenya Bankers Association (KBA), Cytonn Investment Plc, Sterling Capital, and Genghis Capital have forecast that the monetary committee will reduce the Central Bank Rate (CBR) from 11.25 per cent in a bid to spur growth of the economy.
Although KBA did not make any specific figure in its prediction, it argued that because the key macro-economic fundamentals such as inflation and exchange rates were low or within the targeted levels, there is a need for the monetary committee to reduce the benchmark lending rates.
According to KBA, continued stability of the Kenya Shilling against major currencies and anchored inflationary pressures calls for the committee to revise the lending rate downwards.
A reduction of the CBR signals an easing of monetary policy and a desire for market interest rates to move downwards. Lower interest rates encourage economic activity and thus high economic growth. When interest rates decline, the quantity of credit demanded should increase.
Cytonn Investments expects the MPC to cut the CBR by 50 basis points to 100 basis points to within a range of 10.25% – 10.75%.
According to Cytonn Investments, the benchmark lending rate which currently stands at 11.25 per cent needs to be revised downwards in order to spur growth, support private sector financing, for continued stability of the Shilling against major currencies and target inflation.
“Given the expansionary policy which began in 2024, we expect the same to continue in 2025 as the policy committee evaluates the effect of the lower CBR on the country’s inflation rate and local currency performance in a bid to support private sector credit and lower borrowing costs for the government leading to a spur in economic growth,” Cytonn Investment Plc. said.
It also noted that for the yield curve to normalize in the short to medium-term as the government turns to increased external borrowing, thereby alleviating pressure on the domestic market.
Genghis Capital has also predicted a reduction of the CBR rates by 100 basis points to 10.25 per cent, which is good to check inflation, and spur economic development. Its basis for the reduction of the lending is the same as those of Cytonn Investments and KBA.
However, as the MPC meets, Sterling Capital, Head of Research, Renaldo D’Souza, says that MPC needs to understand that the growth of small and medium enterprises (SMEs) is the key to unlocking many issues in Kenya.
According to D’Souza statistics show that SMEs are the primary source of employment, contributor to the country’s GDP, driver of innovation, and foster economic development, essentially acting as the backbone of the Kenyan economy.
But despite these advantages, they face challenges that have more to do with lack of funding which CBK can unlock by reducing the benchmark lending rates.