CBK Holds Interest Rate at 8.75% as Credit Growth Rebounds

The Central Bank of Kenya has held its benchmark Central Bank Rate at 8.75 percent for a fourth consecutive Monetary Policy Committee meeting, opting for continuity over further easing as policymakers weigh a stable domestic inflation picture against lingering external risks.

Inflation Holds Steady

Headline inflation held at 6.5 percent in July, comfortably within the CBK's target band, with core inflation, which strips out volatile food and fuel prices, running at a more modest 3.2 percent.

Non-core inflation, by contrast, eased only marginally to 15.0 percent, a reminder that food and energy costs remain the more volatile and politically sensitive part of Kenya's price picture, even as the headline number looks reassuring.

Credit Growth Rebounds

Perhaps the most encouraging detail in the MPC's assessment was private-sector credit growth, which rebounded to 10.2 percent in July, a striking turnaround from the 2.9 percent contraction recorded as recently as January 2025.

Commercial bank lending rates have also continued to ease, falling to 14.3 percent in July, as the transmission of the CBK's earlier rate cuts works its way through to borrowers.

For businesses that spent much of the past two years complaining about the cost and availability of credit, the rebound will be a welcome, if overdue, signal.

Watching the Middle East

The Bank was notably candid about the external risks still shaping its thinking. It said it would continue monitoring global oil prices and the possible second-round effects on inflation, contingent on whether the Middle East conflict de-escalates, a direct acknowledgement that geopolitical shocks far from Nairobi can still move Kenyan pump prices and, from there, the entire cost structure of the economy.

The shilling's relative stability through this period of external turbulence gave the MPC additional room to hold rather than cut.

Businesses hoping for another rate cut will likely need to wait for clearer signs that both inflation and global oil markets have settled before the CBK moves again.