The Central Bank of Kenya (CBK) has reduced its key interest rate, the Central Bank Rate (CBR), by 0.25 percentage points, setting it at 9.00 percent, down from 9.25 percent. This adjustment signals ongoing confidence in Kenya’s economic stability, supported by a firm national currency and positive projections for inflation.
This decision was made by the Monetary Policy Committee (MPC) during its meeting on December 9, 2025. The committee cited diminishing inflationary pressures and an increase in lending to the private sector as the primary reasons for the rate cut.
According to the CBK’s Weekly Bulletin, released on December 11, 2025, overall price increases are anticipated to stay below the midpoint of the 5±2.5 percent target range in the near future. The bulletin also noted that commercial banks’ credit provision to the private sector continued to improve, correlating with lower borrowing costs.
This interest rate reduction represents the latest step in a measured period of easing monetary policy. Domestic price pressures remain contained despite current global economic instability. The MPC observed that central banks in major economies have been cautious about lowering their rates, basing decisions on their own inflation and growth prospects, which highlights Kenya’s relatively secure economic standing.
Currency Stability and Strong Reserves
The decision to ease monetary policy was further supported by the consistent stability observed in the foreign currency exchange market. The CBK bulletin indicated that the Kenyan shilling maintained its steady value against major international and regional currencies during the week ending December 11, 2025. On that date, the shilling traded at KSh 129.16 per US dollar, a slight appreciation of 0.19 percent from KSh 129.41 on December 4.
Kenya’s foreign currency reserves remained robust, standing at USD 12,065 million as of December 10. This amount covers 5.24 months of imports, comfortably surpassing the central bank’s mandatory minimum of four months. Such a strong reserve position provides the central bank with greater leeway in conducting monetary policy and responding to external economic disruptions.
Market Liquidity
During the review period, there was ample liquidity in the money market. Commercial banks held surplus reserves averaging KSh 13 billion above the 3.25 percent Cash Reserve Ratio requirement. Reflecting improved monetary policy transmission, the Kenya Shilling Overnight Interbank Average Rate (KESONIA) decreased from 9.24 percent on December 4 to 9.05 percent by December 10.
The MPC also expressed satisfaction with advancements in structural reforms within the banking sector. They noted that a modified Risk-Based Credit Pricing (RBCP) framework, set to be fully implemented by March 2026, is expected to enhance how monetary policy changes influence commercial bank lending rates and bring greater clarity to how loan costs are determined.
Market activities reflected this relaxed monetary approach. Interbank transactions increased to an average of 25 deals daily from 17 in the prior week, and the total value of these transactions grew from KSh 11.8 billion to KSh 12.9 billion.
