In a significant move aimed at stimulating economic growth, the Central Bank of Kenya (CBK) announced a reduction in the Central Bank Rate (CBR) from 10.75% to 10.00% during its Monetary Policy Committee (MPC) meeting held on April 8, 2025. This decision reflects the CBK’s commitment to fostering a conducive environment for lending and investment in Kenya.
Central Bank of Kenya Governor Kamau Thugge, who chaired the meeting, emphasized that the reduction in the CBR is expected to encourage banks to increase lending to the private sector, thereby boosting economic activity. The move comes amidst a backdrop of declining average lending rates since December 2024, although private-sector credit growth has remained subdued.
Also Read: Kenya’s Inflation Rate Climbs to 3.6% in March 2025
The MPC also introduced measures to enhance the efficacy of the monetary policy framework. These include narrowing the interest rate corridor around the CBR from ±150 basis points to ±75 basis points and lowering the relevant interest rate on the discount window to 75 basis points above the CBR. These adjustments aim to stabilize the interbank rate and improve monetary policy transmission.
Central Bank of Kenya Following Global Trends.
The Central Bank of Kenya’s decision aligns with global trends, where central banks have been lowering interest rates to address inflation and support economic growth. In Kenya, the average commercial bank’s lending rate declined to 15.8% in March 2025, down from 16.4% in February.
“This development is expected to have a positive impact on businesses and investors, as cheaper loans could lead to increased investment and expansion opportunities. However, the Central Bank of Kenya (CBK) will need to monitor the effects of this policy change closely to ensure that it achieves its intended objectives without compromising financial stability.” – Rennie Odek, Analyst at The Trading Room.
