Central Bank cuts rates by another 25 basis points in October

Monetary policy easing continues: At its meeting on 7 October, the Central Bank of Kenya (CBK) lowered its policy rate by 25 basis points to 9.25%. The reduction was the eighth consecutive, and means the policy rate is down 375 basis points since August 2024. The decision was in line with market expectations.

Inflation remained within target in September: The CBK’s decision to cut rates again was driven by inflation remaining below the midpoint of its 2.5–7.5% target range in September, and by its expectations that the downward trend will continue in the near term due to a stable exchange rate and subdued energy prices. This outlook gave the CBK room to support economic activity, with lower interest rates encouraging bank lending to the private sector; in Q2, GDP growth rose only marginally from Q1, suggesting that financing costs could be reduced further to aid the economy.

The CBK is set to cut rates further: The Central Bank did not provide specific forward guidance. All of our panelists see an additional 25 basis point cut in the next meeting of the year in December. A weaker-than-expected shilling is an upside risk.

Panelist insight: Goldman Sachs’ Andrew Matheny said: “Overall, though growth has marginally accelerated from 4.9% in Q1 2025 to 5.0%yoy in Q2, below target inflation and still restrictive monetary conditions suggest that the Bank will continue its cutting cycle.”

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