CBK Holds Rate at 8.75% as Private-Sector Credit Grows 10.6% in September

The Central Bank of Kenya (CBK) left its benchmark Central Bank Rate at 8.75 per cent after its October 7 meeting, marking the eighth consecutive hold and the fourth straight since February.

The Monetary Policy Committee said inflation in September rose to 6.8 per cent from 6.6 per cent in August, remaining within the 7.5 per cent ceiling.

Core inflation increased to 4.0 per cent in September from 3.4 per cent in August, while non-core inflation fell to 14 per cent from 14.7 per cent.

The MPC noted that inflation is expected to stay within the target range in the near term, supported by monetary policy actions, government interventions and a stable exchange rate.

Growth in commercial-bank lending to the private sector accelerated to 10.6 per cent in September from 10.3 per cent in August, after a 2.9 per cent contraction in January 2025, the MPC said.

The increase was driven by stronger demand in trade, building and construction, agriculture, finance and insurance and consumer durables.

Average commercial-bank lending rates edged up to 14.4 per cent in September from 14.3 per cent in August, well below the 17.2 per cent recorded in November 2024.

Gross non-performing loans fell to 13.9 per cent of total loans in September, down from 14.8 per cent in June and from 17.6 per cent in August 2025, with declines noted in financial services, agriculture, trade and energy and water sectors.

The CBK raised its 2026 economic growth forecast to 5 per cent from 4.9 per cent and projected growth of 5.3 per cent in 2027, citing resilience in industry and services.

Surveys of CEOs and market perceptions in September showed businesses optimistic about activity over the next year, attributing confidence to macro-economic stability, increased infrastructure spending, digital innovation and better access to credit as bank rates have declined.

The committee warned that prolonged geopolitical tensions, uncertainty over global trade policies and the possible impact of El Niño pose risks to the outlook.

The Kenyan shilling has held at KSh129 since April and foreign-exchange reserves stand at USD 14.7 billion, roughly KSh1.9 trillion.

Government measures such as lower fertilizer prices have helped cushion consumers, and above-average rainfall expected between October and December is projected to lower food prices.