The Central Bank of Kenya has cut its base lending rate by a quarter of a percent, leading to a reduction to 8.75%. The reduction was announced as the Monetary Policy Committee concluded its meeting on Tuesday, February 10, 2026, seeking to lower borrowing costs not just for companies but also for households. It marks a cut of 0.25%.
Inflation is still very low, and the economy is doing very well. In January, inflation also softened to 4.4% after rising to 4.5% the prior month. In addition, the prices for food items have also softened. Non-core inflation softened further to 10.3%, but core inflation rose to 2.2% after prices for some processed foods rose. With fuel prices, the exchange rate, and weather conditions not changing, inflation is not likely to change significantly.
Growth remains on track. The Kenyan economy has been estimated to grow at approximately 5.0% in 2025, driven by the services and industries segments, with favorable conditions spilling over to the agricultural segment as a tailwind. Projections for 2026 and 2027 have been estimated at 5.5% and 5.6%, respectively.
Credit to the private sector in the country is growing steadily. Last January, credit to the private sector gained 6.4% due to strong demand for credit from construction, trade, and households. The average bank lending rate declined further to 14.8% from 15.0% in October, and further interest rate cuts are anticipated in the coming days.
This policy signal will be reinforced by the MPC’s intention to tighten its interest rate band and its discount window rate, in order to “ensure that easing of monetary policy is reflected in lower net interest rates on loans.”
Changes are in the offing. From March 2026, the bank will implement the Risk-Based Credit Pricing Model, which will make loan pricing simpler and fairer. This represents the tenth consecutive reduction of the benchmark rate and is intended to encourage borrowing and help the economy grow.
It is expected that the Central Bank will closely monitor both internal and external factors so that it can maintain price stability while also promoting economic growth. The next MPC meeting is due in April, 2026.
