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

The Central Bank of Kenya kept its benchmark lending rate at 8.75 per cent at the October 7 meeting, marking the fourth consecutive decision to leave the rate unchanged as inflation stayed inside the target band despite external shocks.

In September, commercial-bank lending to the private sector rose 10.6 per cent year-on-year, up from 10.3 per cent in August and reversing a 2.9 per cent decline recorded in January 2025, according to the Monetary Policy Committee.

The committee said the acceleration reflected stronger demand in trade, building and construction, agriculture, finance and insurance, and consumer durables.

Average lending rates at commercial banks edged higher to 14.4 per cent in September from 14.3 per cent in August, remaining well below the 17.2 per cent level seen in November 2024.

The central bank also lifted its 2026 growth forecast to 5 per cent from 4.9 per cent and projects a 5.3 per cent expansion in 2027, citing better performance in industry and services.

September surveys of CEOs and market perceptions indicated that businesses stay optimistic about activity over the next twelve months, pointing to macro-economic stability, increased government infrastructure spending, digital innovation and easier access to credit as key factors.

The banking sector stayed stable, with strong liquidity and capital adequacy, while the share of gross non-performing loans fell to 13.9 per cent in September, down from 14.8 per cent in June and 17.6 per cent in August 2025, with improvements recorded in financial services, agriculture, trade and energy-water sectors.

Inflation rose to 6.8 per cent in September from 6.6 per cent in August, driven mainly by higher prices for processed foods such as milk, wheat products and edible oils; core inflation increased to 4.0 per cent from 3.4 per cent, and non-core inflation slipped to 14 per cent from 14.7 per cent.

The MPC expects inflation to remain within the 7.5 per cent ceiling in the near term, supported by monetary-policy actions, government interventions and a stable exchange rate, and anticipates above-average rainfall between October and December to help lower food prices.

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