For the ninth time in a row, the Central Bank of Kenya (CBK) has moved to lower the cost of borrowing, cutting the benchmark lending rate from 9.25 percent to 9.00 percent on Tuesday. The decision comes as a timely gift for cash-strapped households and businesses bracing for the high-spending festive season.

The Monetary Policy Committee (MPC), chaired by Governor Kamau Thugge, cited stable inflation and the need to breathe life into the private sector as the primary drivers for the 25-basis-point cut. With the economy showing signs of resilience but credit uptake still lagging, the regulator is betting that cheaper money will grease the wheels of commerce during the critical December trading period.

Why This Cut Matters Now

This reduction is not just a statistic; it is a signal. By bringing the Central Bank Rate (CBR) down to 9.00 percent—the lowest level in over a year—the CBK is explicitly telling commercial banks to unlock capital. For the average Kenyan, this trajectory offers hope that the era of prohibitively expensive loans is waning, potentially easing the burden of school fees in January and holiday expenses now.

• New Benchmark Rate: 9.00% (down from 9.25%)
• Inflation Context: Stabilized at 4.5% in November 2025
• Policy Streak: 9th consecutive rate cut since the easing cycle began

"The Committee concluded that there was scope for a further easing of the monetary policy stance," Governor Thugge noted in his briefing. He emphasized that the move is designed to "augment previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity."

The 'Kenyan Lens': Will Banks Listen?

While the CBK’s intent is clear, the transmission to the mwananchi remains the sticking point. Despite the cumulative 175 basis points unwind in rates throughout 2025, commercial banks have been slow to adjust their lending rates downwards. Currently, average lending rates hover around 14.9 percent, a figure the regulator wants to see drop further to spur genuine growth.

Analysts warn that while the signal is positive, the immediate impact on your December grocery bill or quick mobile loan may be minimal. The real relief is expected to trickle down in early 2026 as banks recalibrate their risk pricing models. However, for businesses seeking working capital to restock for Christmas, the consistent downward trend reduces the fear of future rate hikes, encouraging investment.

Inflation and the Shilling

The regulator’s confidence is underpinned by a stable macroeconomic environment. Inflation fell to 4.5 percent in November, comfortably within the government’s target range of 2.5 to 7.5 percent. Furthermore, the Kenya Shilling has held its ground against major global currencies, trading firmly and shielding importers from the volatility seen in previous years.

"With inflation expectations firmly anchored and the exchange rate stable, we have the room to support growth," Thugge added. The CBK’s foreign exchange reserves remain robust, providing a buffer of over 4.5 months of import cover, ensuring the country can meet its external obligations without pressure on the local currency.

As the MPC breaks until February 2026, the ball is now firmly in the court of commercial banks. The regulator has done its part; now, Kenyans wait to see if the financial institutions will pass on the Christmas cheer in the form of truly affordable credit.