Central Bank maintains base lending rate at 8.75% in its April review

The Central Bank of Kenya has held its benchmark lending rate steady at 8.75 per cent, taking a cautious stance amidst global economic shocks.

In its latest Monetary Policy Committee (MPC) decision, the regulator opted to maintain the Central Bank Rate, arguing that the current policy position is sufficient to anchor inflation expectations and support exchange rate stability.

This comes at a time when the sector is already recording a slight uptick in bad loans within the banking sector.

According to the banking regulator, the decision comes against a backdrop of rising geopolitical tensions, particularly the conflict in the Middle East, which has disrupted supply chains and pushed up global energy prices.

“Having considered these developments, the Committee therefore concluded that the current monetary policy stance, with the Central Bank Rate unchanged at 8.75 per cent,” CBK Governor Kamau Thugge noted.

The global economic shocks pressures are already beginning to filter into domestic inflation dynamics, with Kenya’s headline inflation inching up to 4.4 per cent in March 2026 from 4.3 per cent the previous month—still comfortably within the CBK’s target band of between 2.5 and 7.5 per cent.

However, beneath the surface of macroeconomic stability, the banking sector is showing early signs of strain.

Data from the MPC shows that the ratio of gross non-performing loans (NPLs) rose slightly to 15.6 per cent in March 2026, up from 15.4 per cent in December 2025.

The increase, though marginal, highlights persistent stress in key segments of the economy.

The rise in bad loans was most pronounced in personal and household lending, trade, agriculture and manufacturing

Despite the uptick, the NPL ratio remains significantly lower than the 17.6 per cent recorded in August 2025, pointing to a gradual improvement trend over the past year.

Even as bad loans edged up, Thugge noted that lending activity in the economy continued to recover.

Private sector credit growth rose to 8.1 per cent in March 2026, up from 7.4 per cent in February and a contraction of -2.9 per cent in January 2025.

This rebound reflects improving demand for credit, particularly in sectors such as construction, trade and agriculture.

At the same time, lending rates have continued to ease, with the average commercial bank lending rate falling to 14.7 percent in March, compared to 17.2 per cent in November 2024.