The Central Bank of Kenya (CBK) has cut its benchmark lending rate by 25 basis points to 8.75%, defying calls from lobbyists to maintain the rate at its previous level.
The move is, undeniably, a big favour to Kenyan borrowers who will now feel a lower lending rate.
CBK’s Monetary Policy Committee (MPC) trimmed the rate during its February 10, 2026, meeting when it cited stable inflation, steady economic growth and foreign exchange stability as justification for easing monetary policy.
“The MPC decided to lower the Central Bank Rate (CBR) by 25 basis points to 8.75 % from 9%,” said CBK Governor Dr. Kamau Thugge.
While the move is expected to lower borrowing costs for households and businesses and stimulate private sector credit, it has jinxed lenders who had advocated for the rate to remain unchanged during the ongoing transition to the revised Risk-Based Credit Pricing Model (RBCPM).
The lobbyists, led by the Kenya Bankers Association (KBA), had wooed the regulator to maintain the benchmark at 9% to provide stability as banks integrate the new pricing framework into their systems.
Also Read: CBK Urged to Retain Benchmark Rate During RBCPM Implementation Phase
KBA boss Raymond Molenje had petitioned that the retained rate could have improved transparency and comparability of loan prices while giving both lenders and customers time to understand how borrowing costs are calculated under the revised model.
It is a glaring jinx by the majority of lenders who had opted for CBR, where a customer-specific risk premium, known as “K,” is assessed at the time of the loan application.
This is opposed to an alternative KESONIA, the transaction-based benchmark, which reflects average overnight interbank lending costs currently at 8.98%, relative to the short-term Treasury Bill rates.
According to KBA, about 48% of banks still rely on the CBR, 34% use a hybrid of CBR and KESONIA, and only 18% have fully transitioned to KESONIA, highlighting resistance and operational challenges within the industry.
Despite the pushback, CBK maintains that economic fundamentals support policy easing.
Inflation is expected to remain below the midpoint of the target range in the near term, helped by stable food and energy prices and exchange rate stability.
