Central Bank decreases rate in August

Bank cuts rates a seventh consecutive time: At its meeting on 12 August, the Central Bank of Kenya (CBK) opted to lower its Central Bank Rate (CBR) by 25 basis points to 9.50%—the lowest level since mid-2023. The reduction mirrored June’s, met market expectations and marked the seventh consecutive cut.

On-target inflation leaves room for cuts to stimulate lending and activity: The key factors driving the Central Bank's decision were inflation and economic growth. Regarding the first, inflation remained below the midpoint of the CBK’s 2.5%–7.5% target range from June 2024–July 2025. Moreover, the Bank noted inflation expectations remained anchored. On economic activity, the CBK noted the resilience of the Kenyan economy, citing real GDP growth of 4.9% year on year in the first quarter of 2025 and its expected continued growth. Still, with inflation under control, the Bank reduced rates to spur lending and economic activity in turn.

Panelists split between a hold and more cuts: The Central Bank provided no specific forward guidance on future interest rate movements in its communiqué. Our panel is currently split between the Bank standing pat through end-2025 and a further 50 basis points of cuts. The Committee will meet again in October.

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