Borrowers received an early Christmas gift Tuesday as the Central Bank of Kenya (CBK) trimmed its benchmark lending rate to 9.0%, marking the ninth consecutive reduction in a historic easing cycle aimed at reigniting the economy.

With inflation tamed and the shilling finding its footing, the regulator is shifting its focus from firefighting to fueling growth. The move places the burden squarely on commercial banks to pass these savings on to wananchi, who have long grappled with the stifling weight of double-digit interest rates.

The End of the Tightening Era

The Monetary Policy Committee (MPC), chaired by Governor Kamau Thugge, lowered the Central Bank Rate (CBR) from 9.25% to 9.00%. This decision extends an aggressive easing streak that has shaved off a cumulative 400 basis points since the cycle began in early 2024.

"The move will augment previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity," Dr. Thugge noted in a briefing following the meeting. He emphasized that the decision was anchored on solid data: headline inflation eased to 4.5% in November, comfortably within the government’s target range of 2.5% to 7.5%.

• New CBR: 9.00% (down from 9.25%)
• Inflation: 4.5% (November 2025)
• Forex Reserves: $12.09 billion (approx. KES 1.57 trillion)
• Import Cover: 5.25 months

Cheaper Loans on the Horizon?

For the average Kenyan business owner or prospective homeowner, the burning question remains: When will my loan repayment go down? The regulator’s data offers a glimmer of hope. Average commercial bank lending rates have already dipped to 14.9% in November, down from highs of over 17% a year ago.

The CBK is banking on the new risk-based pricing model and the transition to the Kenya Shilling Overnight Interbank Average (Kesonia) to speed up this transmission. "There will be no excuse for banks," Thugge warned earlier this year, urging lenders to stop hiding behind opaque pricing structures.

Private sector credit growth, a key pulse check for the economy, is showing signs of life. It rose to 6.3% in November, up from 5.9% in October. While this is an improvement from the contraction seen in early 2025, it still lags behind the double-digit growth needed to drive robust job creation.

Resilience Amidst Global Shocks

Despite global geopolitical tensions, the Kenyan economy has displayed remarkable resilience. The MPC projects GDP growth to hit 5.2% in 2025 and accelerate to 5.5% in 2026. This optimism is fueled by a rebound in the services sector, steady agricultural output, and a manufacturing sector that is slowly finding its feet.

The country’s external position also remains strong. Foreign exchange reserves stand at a robust $12.09 billion (approx. KES 1.57 trillion), providing a cushion of 5.25 months of import cover—well above the statutory requirement of four months. This buffer is critical for shielding the shilling against external shocks, ensuring that the cost of imported fuel and raw materials remains predictable.

"The outlook is positive, but we remain vigilant," said an analyst at a Nairobi-based investment firm. "The key now is execution. If banks play ball and credit starts flowing to SMEs, 2026 could be a breakout year for the Kenyan economy."