CBK Slashes Lending Rate to 9.75%
Easing Inflation Brings Relief: Expect Lower Loan Costs, Business Growth Boosts and Cheaper Credit Access
Central Bank of Kenya Cuts Key Lending Rate to 9.75% Amid Easing Inflation
In a significant move poised to ripple through Kenya’s Economy the Central Bank of Kenya (CBK) has slashed its benchmark lending rate to 9.75% down from 10.5% following signs of easing inflation and a strengthening shilling.
This is the first rate cut in over 12 months signaling a shift in monetary policy from restraint to accommodation marked at stimulating lending, business activity and consumer spending.
“By inflation trending downward and worldwide commodity prices stabilizing the MPC found room to ease policy while safeguarding Economic stability,” CBK Governor Kamau Thugge stated during the post declaration briefing.
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Why Did CBK Cut the Lending Rate in June 2025?
Key Drivers Behind the Rate Cut:
- Inflation Rate in Kenya Drops to 5.2% (from 6.8% earlier this year)
- Kenyan Shilling Stabilizes Against USD, encouraging import affordability
- Private Sector Growth Slows, needing a monetary boost
- External Pressures Ease such as worldwide oil prices and food supply checks
What Is the CBK Lending Rate and Why It Matters
The CBK interest rate too called the benchmark lending rate is the base cost of borrowing for commercial banks. When this rate changes:
- Banks adjust their base lending rates
- Loan interest rates in Kenya fluctuate
- Businesses and consumers sense the pinch or relief
How the CBK Rate Cut Affects Kenyan Borrowers and Businesses
For Consumers:
- Lower Interest on Loans and Mortgages
- Easier access to credit cards, car loans and personal finance
For Businesses:
- Cheaper business loans for SMEs and corporates
- Likely for increased investment in operations and contracting
For Banks:
- Margin compression could occur however loan volumes may increase
- Base rates likely to fall across main banks (Equity, KCB, Co-op)
Kenya’s Economic Outlook: A Turning Point?
By this CBK monetary policy shift Kenya joins a rising list of Economies moving from aggressive tightening to pro growth stances.
Economic Signals to Watch:
- Private sector credit growth expected to improve by Q3 2025
- Consumer spending trends mostly in urban centers such as Nairobi and Mombasa
- Inflation sustainability targeted within the 5 ±2.5% range
FAQs: Understanding the CBK Rate Cut
Q: Why did the CBK reduce the interest rate now?
A: Due to a notable fall in inflation a stronger shilling and signs of weakening demand, CBK felt the Economy could absorb looser credit conditions.
Q: How does this affect your existing loan?
A: While existing fixed rate loans remain unchanged variablerate loans may see immediate or near term Reductions.
Q:Is this the start of a new rate-cutting cycle?
A: Experts trust so. Should inflation remain tame extra CBK rate cuts may follow in the coming quarters.
Final Thoughts: What Should You Do Now?
If you are a business owner or consumer in Kenya this is the correct time to review your loan options and financial strategy.