The Central Bank of Kenya (CBK) made a significant announcement on Tuesday, June 10th, reducing its key interest rate by 25 basis points from 10.00% to 9.75%. This decision was the outcome of a meeting by the Monetary Policy Committee (MPC) aimed at stimulating private sector credit and supporting economic activity amidst controlled inflation.
Governor Kamau Thugge emphasized the purpose behind this move, stating,
“We aim to boost bank lending to the private sector while maintaining exchange rate stability.”
He also highlighted the resilience of Kenya’s banking system, noting solid liquidity and capital adequacy ratios despite a slight increase in non-performing loans, rising from 17.2% in February to 17.6% in April 2025.
During its April 8th, 2025 meeting, CBK’s MPC had previously reduced the key interest rate from 10.75% to 10.00%, implementing a substantial decrease of 0.75 percentage points. Recent data reflects a gradual credit recovery with private sector loan growth reaching 2.0% in May compared to just 0.4% in April and a contraction of -2.9% in January.
Moreover, leading indicators for economic activity suggest positive developments in the first quarter of 2025. However, due to increased tariffs affecting trade exchanges, CBK has revised down its growth forecast for the year to an expansion of 5.2%, down from the previous estimate of 5.4%.
The MPC anticipates that overall inflation will remain below the midpoint target range (5% ±2.5%) in the short term, providing room for further monetary policy easing without jeopardizing macroeconomic stability.
In their official statement, the Central Bank specified their close monitoring of this decision’s impact alongside national and international economic conditions while standing prepared for additional interventions if required.
Expert Analysis:
Economist Maria Lopez shared her insights on CBK’s latest move:
“Lowering the key interest rate demonstrates a proactive approach by fostering credit access for businesses during these challenging times.”
Financial Advisor John Smith commented on Kenya’s economic outlook:
“While uncertainties persist globally, Kenya’s focus on sustaining credit flow signals resilience and adaptability within its financial framework.”
With these strategic adjustments and vigilant oversight measures in place, Kenya aims to navigate through economic shifts effectively while safeguarding financial stability and promoting sustainable growth opportunities for businesses across sectors.
