Central Bank of Kenya. Photo | courtesy.
The Central Bank of Kenya (CBK) has lowered the Central Bank Rate (CBR) by 0.25 percentage points to 9.75 percent, citing sustained decline in inflation, a stable exchange rate, and a slowdown in economic growth both globally and locally.
In a statement released following its Monetary Policy Committee (MPC) meeting held today, the CBK said the decision was aimed at supporting economic activity while maintaining price and exchange rate stability.
“The Monetary Policy Committee (MPC) met on June 10, 2025, and reviewed the outcomes of its previous decisions and measures implemented to anchor inflationary expectations and maintain exchange rate stability,” read the statement.
Kenya’s overall inflation declined to 3.8 percent in May 2025 from 4.1 percent in April remaining well within the target band of 5 ±2.5 percent. This was driven by falling food and energy prices, including electricity, and a drop in non-core inflation to 6.0 percent.
“Non-core inflation declined reflecting lower prices of food crops and related items, particularly vegetables,”the CBK said.
“Additionally, lower energy and utilities inflation continued to moderate non-core inflation, on account of lower electricity prices.” CBK added.
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Despite a slight rise in core inflation to 2.8 percent in May from 2.5 percent in April due to rising processed food costs, the CBK maintained that overall inflation is expected to remain below the mid-point of the target range in the near term, supported by continued price and exchange rate stability.
The MPC’s decision also comes amid mounting global challenges. The CBK noted that global growth is projected at 2.8 percent in 2025 compared to 3.3 percent in 2024, with major economies like the U.S. and China seeing downward revisions due to high tariffs and geopolitical tensions.
While international oil prices have moderated due to subdued demand, the CBK cautioned that the risk of potential volatility remains elevated due to higher tariffs on imports, and persistent geopolitical tensions.
Domestically, economic growth slowed to 4.7 percent in 2024 from 5.7 percent in 2023, according to the Economic Survey 2025.
Although first-quarter data shows signs of recovery, the CBK revised its 2025 growth projection down to 5.2 percent from 5.4 percent, citing trade-related headwinds.
“Leading indicators of economic activity point to improved performance in the first quarter of 2025,” the statement noted. However, the CBK emphasized that external risks could dampen the outlook.
The rate cut to 9.75 percent is expected to ease credit conditions and stimulate private sector investment.
The next MPC meeting will assess the evolving economic conditions and make further policy adjustments if necessary
