Kenya Central Bank Cuts Rate to 8.75 Percent in Tenth Straight Easing Move

The Central Bank of Kenya lowered its benchmark interest rate to 8.75 percent from 9.00 percent, marking its tenth consecutive cut, the Monetary Policy Committee said.

The bank said the move is aimed at supporting lending to the private sector and reinforcing earlier measures to stimulate credit growth.

Inflation eased to 4.4 percent year on year in January from 4.5 percent in December. The rate remains within the bank's target range of 2.5 percent to 7.5 percent.

Kenya's economy has been expanding at around 5 percent annually. The central bank forecasts growth of 5.5 percent this year and 5.6 percent in 2027, compared with an estimated 5.0 percent last year. The 2025 outlook was revised down from 5.2 percent due to weaker agricultural output in the third quarter.

The bank expects the current account deficit at 2.2 percent of GDP in 2026 and 2027, from 2.4 percent in 2025. It also narrowed the interest rate corridor around the policy rate to plus or minus 50 basis points from 75 basis points.

Key Takeaways

Kenya's rate cuts reflect easing inflation and efforts to support credit in a slowing global environment. Lower borrowing costs could help small businesses and households access financing, though transmission to lending rates depends on bank balance sheets and risk conditions. Agriculture remains a key driver of output and employment, leaving growth exposed to weather shocks. A potential drought flagged by meteorological authorities could weigh on food supply and inflation later in the year. By narrowing the interest rate corridor, the central bank aims to strengthen the link between the policy rate and interbank market rates, improving monetary policy transmission. Stable inflation within target gives policymakers room to focus on growth, while the projected narrowing of the current account deficit suggests external balances remain manageable.

This article originally appeared on Daba Finance.