The move, announced following the Monetary Policy Committee (MPC) meeting on December 9, 2025, signals confidence in Kenya’s economic stability amid a stable shilling and positive inflation outlook.
According to the CBK, overall inflation is expected to remain below the midpoint of the 5±2.5 percent target range in the near term.
According to the CBK, overall inflation is expected to remain below the midpoint of the 5±2.5 percent target range in the near term.
The central bank also noted improved private sector lending, reflecting an easing of interest rates and better access to credit.
“The policy decision follows a careful review of inflation, credit growth, and overall economic conditions. Our economy remains resilient despite global uncertainties,” CBK said in its weekly bulletin released on December 11, 2025.
The easing of the policy rate is supported by stability in the foreign exchange market. The Kenyan shilling has remained steady against major international currencies, trading at KSh 129.16 per US dollar on December 11, up slightly from KSh 129.41 on December 4, representing a 0.19 percent appreciation.
Kenya’s foreign exchange reserves remain healthy at USD 12,065 million as of December 10, 2025. This level is equivalent to 5.24 months of import cover, well above the statutory minimum of four months. These reserves provide the CBK with flexibility to manage monetary policy and mitigate external economic shocks.
Liquidity in the banking system remains sufficient, with commercial banks holding an average of KSh 13 billion above the required 3.25 percent Cash Reserve Ratio (CRR). Reflecting better monetary policy transmission, the Kenya Shilling Overnight Interbank Average Rate (KESONIA) fell to 9.05 percent on December 10 from 9.24 percent on December 4.
The MPC also highlighted progress on banking sector reforms. The revised Risk-Based Credit Pricing (RBCP) model, expected to be fully operational by March 2026, will enhance the link between the central bank’s policy decisions and commercial banks’ lending rates. This system aims to increase transparency and fairness in loan pricing.
The financial market has responded positively to the rate cut. Interbank transactions increased to an average of 25 deals per day, up from 17 the previous week, with volumes rising from KSh 11.8 billion to KSh 12.9 billion. These figures indicate that banks are actively adjusting to the accommodative monetary policy.
The CBK’s decision to reduce the policy rate comes at a time when Kenya continues to show resilience amid global economic uncertainties. The stable shilling, strong foreign exchange reserves, and improving credit growth suggest that the country is well-positioned to manage both domestic and external economic pressures.
CBK Governor expressed confidence that the rate cut would support economic growth by lowering borrowing costs for businesses and households, ultimately encouraging investment and consumption. The central bank continues to monitor inflation and exchange rate developments closely to ensure the policy stance remains appropriate.
“The policy decision follows a careful review of inflation, credit growth, and overall economic conditions. Our economy remains resilient despite global uncertainties,” CBK said in its weekly bulletin released on December 11, 2025.
The easing of the policy rate is supported by stability in the foreign exchange market. The Kenyan shilling has remained steady against major international currencies, trading at KSh 129.16 per US dollar on December 11, up slightly from KSh 129.41 on December 4, representing a 0.19 percent appreciation.
Kenya’s foreign exchange reserves remain healthy at USD 12,065 million as of December 10, 2025. This level is equivalent to 5.24 months of import cover, well above the statutory minimum of four months. These reserves provide the CBK with flexibility to manage monetary policy and mitigate external economic shocks.
Liquidity in the banking system remains sufficient, with commercial banks holding an average of KSh 13 billion above the required 3.25 percent Cash Reserve Ratio (CRR). Reflecting better monetary policy transmission, the Kenya Shilling Overnight Interbank Average Rate (KESONIA) fell to 9.05 percent on December 10 from 9.24 percent on December 4.
The MPC also highlighted progress on banking sector reforms. The revised Risk-Based Credit Pricing (RBCP) model, expected to be fully operational by March 2026, will enhance the link between the central bank’s policy decisions and commercial banks’ lending rates. This system aims to increase transparency and fairness in loan pricing.
The financial market has responded positively to the rate cut. Interbank transactions increased to an average of 25 deals per day, up from 17 the previous week, with volumes rising from KSh 11.8 billion to KSh 12.9 billion. These figures indicate that banks are actively adjusting to the accommodative monetary policy.
The CBK’s decision to reduce the policy rate comes at a time when Kenya continues to show resilience amid global economic uncertainties. The stable shilling, strong foreign exchange reserves, and improving credit growth suggest that the country is well-positioned to manage both domestic and external economic pressures.
CBK Governor expressed confidence that the rate cut would support economic growth by lowering borrowing costs for businesses and households, ultimately encouraging investment and consumption. The central bank continues to monitor inflation and exchange rate developments closely to ensure the policy stance remains appropriate.
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