Kenyans will continue enjoying cheaper access to loans for the next two months following a new move by the Central Bank of Kenya (CBK).
In its latest update, the CBK has lowered the base lending rate for the sixth time in a row since August last year — a decision aimed at boosting lending and strengthening the country’s economy.
According to the Monetary Policy Committee (MPC) report released on Tuesday, June 10, the base lending rate has been reduced by 25 basis points, dropping from 10.00 percent to 9.75 percent.
This new rate is expected to encourage more banks to lend to businesses and individuals, making credit more affordable across the country.
CBK Governor Kamau Thugge explained that the reduction in interest rates is meant to increase bank lending to the private sector. This move is also intended to support economic growth while maintaining stability in the foreign exchange market.
Thugge also noted that the country’s banking sector remains strong and stable, with sufficient liquidity and healthy capital reserves.
However, despite the positive outlook, the report revealed that the rate of non-performing loans (NPLs) increased slightly. In April 2025, the NPL ratio stood at 17.6 percent compared to 17.2 percent in February.
The sectors that recorded the highest loan defaults included trade, personal and household borrowing, tourism and hospitality, and the building and construction industry.
On a more encouraging note, commercial bank lending to the private sector grew significantly. In May 2025, private sector credit growth rose to 2.0 percent, up from 0.4 percent in April and a negative 2.9 percent in January.
This growth is partly due to improved demand for loans and the lower interest rates. The appreciation of the Kenyan Shilling also helped by reducing the burden of repaying loans that are denominated in foreign currencies.
The MPC also reported that inflation is expected to remain below the middle of the government’s target range of 5 percent, with a tolerance margin of ±2.5 percent. This indicates that inflation will likely stay manageable in the near future, contributing to stable economic conditions.
Additionally, the committee observed that global central banks — especially those in major economies — have begun to reduce their interest rates. However, they are doing so cautiously, keeping in mind various economic uncertainties.
On the global front, economic growth in 2025 is forecasted at 2.8 percent, which is slightly lower than the 3.3 percent recorded in 2024.
The slowdown is largely due to a drop in growth projections for the United States and China, which are being affected by increased tariffs and trade tensions.
Higher tariffs on U.S. imports have led to retaliatory measures from other trading partners, further straining global trade.
Although international oil prices have gone down due to increased supply and weak demand from economies like China, there is still a risk of price volatility.
Ongoing geopolitical tensions and the uncertainty caused by new trade tariffs are likely to keep global oil markets unstable.
On the domestic front, food inflation has slightly decreased, providing some relief to consumers. This drop has mainly been driven by lower prices of cereals and sugar.
However, the prices of edible oils continue to remain high, contributing to persistent inflationary pressure in that category.
In conclusion, the CBK’s move to reduce the base lending rate is expected to help Kenyans access cheaper credit, stimulate business activity, and support economic recovery.
At the same time, the CBK and MPC are keeping a close watch on both local and international developments to ensure that inflation stays in check and the financial sector remains stable.
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