Kenyans will continue to breathe easier on loan repayments after the Central Bank of Kenya on Tuesday cut the base lending rate by 25 basis points, offering fresh relief to households and businesses grappling with high living costs and slow economic recovery.
In a meeting held on December 9, the Monetary Policy Committee (MPC), chaired by CBK Governor Kamau Thugge, lowered the base lending rate by 25 basis points to 9.0 per cent, down from 9.25 per cent.
According to Thugge, the move signals confidence that inflation remains well-contained and that the economy is stable enough to support cheaper credit.
“Having considered
these developments, the Committee concluded that there was scope for a further
easing of the monetary policy stance by reducing the CBR by 25 basis points.
This will augment the previous policy actions aimed at stimulating lending by
banks to the private sector and supporting economic activity,” said the CBK
governor in the MPC brief.
Banks are expected to adjust their lending rates downward in the coming weeks, especially ahead of the rollout of the new Risk-Based Credit Pricing Model in March 2026.
CBK says it will continue monitoring the impact of the rate cut and global economic shifts, with the next review slated for February 2026.
The lower interest rates have seen the banking sector remain stable and resilient, with strong liquidity and capital adequacy ratios.
The ratio of gross non-performing loans (NPLs) to gross loans was 16.5 per cent in November 2025, down from 16.7 per cent in October and 17.6 per cent in August.
“Decreases in NPLs were noted in the mining and quarrying, energy and water, personal and household, and transport and communication sectors. Banks have continued to make adequate provisions for the NPLs,” added Thugge.
The MPC noted that the revised banking sector Risk-Based Credit Pricing Model (RBCPM), which will be fully operational by March 2026, will improve the transmission of monetary policy decisions to commercial banks’ lending interest rates and enhance transparency in the pricing of loans by banks.
