The Central Bank of Kenya (CBK) has reduced its main lending rate by 0.25 percentage points to 8.75 per cent in a move aimed at encouraging banks to lend more to businesses and households.
The decision was made by the Monetary Policy Committee (MPC) during its meeting held on February 10, 2026. CBK said the move is supported by low inflation and a stable economic outlook.
In a statement, the MPC said inflation eased to 4.4 per cent in January 2026 from 4.5 per cent in December 2025, remaining within the government’s target range of 5 per cent, plus or minus 2.5 per cent.
Food-related inflation declined to 10.3 per cent, while core inflation, which excludes food and fuel prices, rose slightly to 2.2 per cent due to higher costs of some processed foods. CBK said inflation is expected to remain stable in the near term, supported by steady energy prices, a stable exchange rate and favourable weather conditions.
The central bank noted that Kenya’s economy continues to show resilience, with growth estimated at 5.0 per cent in 2025. Economic growth is projected to rise to 5.5 per cent in 2026 and 5.6 per cent in 2027, driven by stronger performance in industry, services and a recovery in agriculture.
CBK also reported improved lending to the private sector, which grew by 6.4 per cent in January 2026. Credit demand was strongest in construction, trade and consumer goods. Average commercial bank lending rates fell to 14.8 per cent from 15.0 per cent in October 2025, with further reductions expected following the latest rate cut.
To improve how monetary policy affects lending rates, the MPC narrowed the interest rate corridor and adjusted the Discount Window rate to sit slightly above the CBR. CBK also said the full rollout of the Risk-Based Credit Pricing Model in March 2026 will make loan pricing more transparent and support credit growth.
The latest cut follows a reduction in December 2025, when CBK lowered the rate to 9.0 per cent. The move marked the tenth consecutive rate cut as the central bank seeks to stimulate economic activity and support private sector growth.
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