The Central Bank of Kenya (CBK) has once again cut its benchmark lending rate—this time to 9.75 percent from 10 percent, as the banking sector regulator moves to stimulate private sector borrowing to spur a sluggish economy. 

CBK's cut on Tuesday marks the sixth consecutive policy meeting with a downward revision, implying that the Monetary Policy Committee (MPC) is signaling a continued shift toward pro-growth monetary easing amid easing inflation that dropped to 3.8 percent in May amid a fragile economic recovery.

According to the Central Bank, between February and April 2025, the banking sector experienced an uptick in non-performing loans cutting across trade, personal and household, tourism, as well as in the construction sector. The ratio of non-performing loans to gross loans in the country was at 17.6 percent in April.

"Growth in commercial bank lending to the private sector stood at 2 percent in May 2025 compared to 0.4 percent in April, and -2.9 percent in January 2025," CBK stated.

"There was scope for a further easing of the monetary policy stance to augment the previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity," the bank statement signed off by CBK Governor Dr. Kamau Thugge stated in part.

He added, "The MPC will closely monitor the impact of this policy decision as well as developments in the global and domestic economy and stands ready to take further action."

According to the Economic Survey 2025, Kenya's GDP growth slowed to 4.7 percent compared to 5.7 percent previously with marked contraction in many sectors of the economy.

This year, projections for economic growth show that the country could realize 5.2 percent uptick, reflecting a downward revision from 5.4 percent jump, with the dip attributable to negative impact of US trade tariffs.

In the CBK's survey on CEO in the leadup to Tuesday's announcement on rate cut, the captains of industries reported "subdued consumer demand, high cost of doing business and increased global uncertainties" which could negatively impact business activities in the country. 

The Kenya PMI fell into negative territory in May, as rising prices contributed to a drop in customer spending and weaker business activity. The downturn ended a seven-month run of improving business conditions, although the rate of decline was mild as businesses continued to raise their stock levels and employment.

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