Commercial banks have continued to lower lending rates, offering some relief to borrowers even as the Central Bank of Kenya (CBK) maintained its benchmark interest rate at 8.75 per cent.
The average commercial bank lending rate declined to 14.3 per cent in July 2026, from 14.4 per cent in June, according to the Monetary Policy Committee (MPC).
The rate has fallen significantly from 17.2 per cent recorded in November 2024, pointing to a continued easing in the cost of credit for households and businesses.
The MPC, which met on Tuesday, August 11, retained the Central Bank Rate (CBR) at 8.75 per cent, maintaining the benchmark for the cost of borrowing in the economy.
The Committee noted that growth in commercial banks' lending to the private sector remained strong, rising by 10.2 per cent in July 2026, compared to 10.6 per cent in June.
This marks a sharp turnaround from January 2025, when private-sector credit growth stood at negative 2.9 per cent.
According to the MPC, lending to key sectors of the economy, including trade, building and construction, agriculture and consumer durables, remained strong.
The Committee attributed the growth partly to improved demand for credit as lending interest rates declined.
The decision to maintain the CBR at 8.75 per cent was driven by the need to keep inflation expectations anchored within the target range while maintaining exchange-rate stability.
Kenya's overall inflation remained within the target range in July, although it edged up to 6.5 per cent from 6.4 per cent in June.
Core inflation was relatively stable at 3.2 per cent, compared to 3.1 per cent in June, while non-core inflation fell slightly to 15 per cent from 15.1 per cent.
The CBK, however, warned that global developments could put renewed pressure on prices, particularly through energy costs.
Global inflation is projected to rise to 4.7 per cent in 2026, up from 4.1 per cent in 2025, largely because of higher energy and transport costs.
The MPC highlighted the ongoing conflict in the Middle East as a key risk to both global growth and inflation, particularly if it pushes international oil prices higher.
Kenya's economic growth outlook remained positive, with the economy expanding by 5.3 per cent in the first quarter of 2026, up from 4.9 per cent during the same period in 2025.
The CBK projects economic growth of 4.9 per cent in 2026 and 5.3 per cent in 2027, compared to 4.6 per cent in 2025.
Meanwhile, the banking sector remained resilient, with the ratio of gross non-performing loans to gross loans falling to 14.6 per cent in July, from 15.4 per cent in April and 17.6 per cent in August 2025.
The MPC said it would continue monitoring global oil prices and their potential second-round effects on inflation.
The Committee is scheduled to meet again in October 2026.
