Central Bank of Kenya cuts benchmark rate to 10.00% in fifth consecutive reduction

The Central Bank of Kenya's Monetary Policy Committee cut the Central Bank Rate by 75 basis points to 10.00% from 10.75% on 8 April 2025, its fifth consecutive reduction since it began easing monetary policy in August 2024.

The committee also narrowed the interest rate corridor around the Central Bank Rate from plus or minus 150 basis points to plus or minus 75 basis points.

INFLATION BELOW MIDPOINT

The MPC said the decision was based on the expectation that overall inflation would remain below the midpoint of the government's target range of 5% plus or minus 2.5 percentage points in the near term. Kenya's annual inflation rate rose to 3.6% in March 2025 but remained in the lower half of the band.

The committee also cited the trend of interest rate reductions in major global economies. It noted that average commercial bank lending rates had declined gradually since December 2024, although growth in lending to the private sector remained subdued. The cut was aimed at supporting lending by banks to the private sector.

EASING CYCLE

The CBK began its current easing cycle in August 2024, when it lowered the Central Bank Rate for the first time since 2020, from 13.00% to 12.75%. It followed with reductions of 75 basis points each in October and December 2024, taking the rate to 12.00% and then 11.25%, and a 50-basis-point cut in February 2025 to 10.75%. The April move was therefore larger than the February reduction. The April decision brought the cumulative reduction since the start of the cycle to 300 basis points.