Kenya’s central bank reduced its benchmark interest rate by 25 basis points to 8.75 percent on Tuesday, marking the tenth consecutive rate cut and pushing borrowing costs to their lowest level in three years.
The Monetary Policy Committee (MPC) lowered the rate from nine percent last December, Kamau Thugge, the governor of the Central Bank of Kenya, said in a statement.
The East African latest move aligns with a broader monetary easing trend across parts of the continent, where some central banks lowered rates further as inflation pressures receded. Angola cut its benchmark rate by 100 basis points to 17.5 percent in January—its lowest level since October 2023—citing easing inflation and improved domestic stability.
Ghana delivered a larger than expected 250 basis point reduction to 15.5 percent, the lowest since February 2022, while Mozambique trimmed borrowing costs to 9.25 percent, the lowest level since 2015.
But countries like Uganda, South Africa and Tanzania kept rates steady at 9.75 percent, 6.75 percent and 5.75 percent respectively.
Policymakers said Kenya’s decision builds on earlier measures aimed at stimulating private-sector lending and supporting economic activity, while safeguarding price stability and a stable exchange rate.
According to the country’s statistical agency, annual inflation eased to a six-month low of 4.4 percent in January, down slightly from 4.5 percent in both December and November. Inflation has remained below the five percent midpoint of the central bank’s target range since mid-2024.
Thugge said the latest rate cut would reinforce previous policy actions designed to boost bank lending to businesses and households, anchor inflation expectations, and maintain currency stability.
Kenya is also benefiting from a weaker US dollar and lower global oil prices, which have helped moderate import costs and ease overall price pressures.
However, core inflation—the central bank’s preferred gauge of underlying price trends—edged up to 2.2 percent in January from two percent a month earlier, suggesting policymakers may remain cautious even as the easing cycle continues.
