Kenya Slashes Benchmark Rate to 9 Percent in Ninth Consecutive Cut

Kenya's central bank cut its benchmark interest rate by 25 basis points to 9.0%, extending an easing cycle aimed at lifting bank lending and supporting economic growth.

The move marks the ninth consecutive rate cut as policymakers seek to reinforce earlier measures while keeping inflation expectations contained and the exchange rate stable, the Central Bank of Kenya said in a statement.

The economy continues to expand at about 5% a year. The bank kept its growth forecasts unchanged at 5.2% for 2025 and 5.5% for 2026, though it flagged weather-related risks, including the threat of drought highlighted by the national weather service.

Annual inflation rose to 4.5% in November, remaining within the central bank's target range of 2.5% to 7.5%. Policymakers expect inflation to stay below the midpoint of the band in the near term, supported by lower processed food prices, stable energy costs, and a steady exchange rate.

The bank revised its current account outlook, now projecting a deficit of 2.3% of GDP in both 2025 and 2026, wider than earlier estimates.

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Key Takeaways

Kenya's extended easing cycle reflects confidence that inflation risks remain contained, even as authorities focus on stimulating private-sector credit. Lending growth has lagged economic expansion in recent years, constrained by risk aversion among banks and high borrowing costs for households and businesses. Lower policy rates are intended to ease financing conditions and encourage banks to expand credit to productive sectors such as manufacturing, trade, and agriculture. The central bank has also relied on exchange-rate stability to limit imported inflation, helping maintain room for monetary support. The revised current account forecast points to continued pressure from imports and external financing needs, even as exports and remittances remain resilient. Weather risks remain a key uncertainty, as agriculture plays a central role in growth, employment, and inflation dynamics. With inflation near the middle of its target range and growth holding steady, policymakers appear focused on sustaining momentum while monitoring climate and external risks that could alter the outlook.

Read the original article on Daba Finance.