• CBK reduces prime rate to 9.75% following easing inflation and stable exchange rates
• May 2025 inflation falls to 3.8%, below the 5% midpoint target
• Rate cut aims to boost private sector lending and economic activity

The Central Bank of Kenya (CBK) has reduced its prime lending rate by 25 basis points to 9.75 %, according to a statement released on Tuesday, June 10, 2025. This follows a larger cut in April, when the CBK lowered the rate from 10.75 % to 10 % to boost private sector credit and stimulate the economy.

The monetary policy committee stated that there was room for additional easing to reinforce earlier measures supporting private sector lending and economic activity, while maintaining exchange rate stability and keeping inflation expectations anchored.

Kenya's overall inflation declined to 3.8 % in May 2025, down from 4.1 % in April, remaining below the midpoint of the target range set at 5 % ± 2.5 %. The committee noted that inflation is expected to stay below the short-term midpoint, supported by stable food and energy prices and a steady exchange rate.

Kenya's economic growth slowed to 4.7 % in 2024, down from 5.7 % in 2023, due to weaker performance in several sectors. However, indicators improved in early 2025, prompting the CBK to revise its 2025 GDP forecast slightly downward from 5.4 % to 5.2 %, mainly due to higher trade tariffs.

The prime rate reduction follows requests from commercial banks, which argued that stable inflation and exchange rates justified a further cut to help expand credit to the private sector.

Despite these measures, Kenya continues to face high public debt and has experienced regional disruptions due to flooding. In October 2024, during a review of the economic program, the International Monetary Fund (IMF) highlighted a return of market confidence. External funding pressures had eased, the Kenyan Shilling had stabilized, and foreign exchange reserves had improved.

This is the fourth consecutive rate cut by the CBK since August 2024, when the prime rate stood at 13 %. The monetary policy committee lowered the rate to 10 % in April before the latest reduction to 9.75 %.