The Central Bank of Kenya (CBK) Monetary Policy Committee (MPC) delivered a 25bps cut in its October 2025 meeting to bring the Central Bank Rate to 9.25%, in line with market expectations. This was the eighth consecutive rate cut decision by the MPC since August 2024.
As we take stock of Kenya’s current easing cycle, former Bank of England Governor Mervyn King’s May 2005 speech comes to mind. Therein, he coined Maradona theory of interest rates. Reflecting on the last eight MPC decisions, market expectations have been at odds with the CBK in five out of eight meetings. The market has been moored to CBK’s eventual rate decisions in the last two meetings, attuned to the policymakers’ thought process.
Inflation remains anchored below the mid-point target of 5.0% and a 4.7% print is expected at the end of this year. As Maradona’s first goal scored with the help of his hand, the ‘Hand of God’, the stability in the Shilling at 129 levels has restrained risk of imported inflation.
Our assessment of the soft data, the surveys conducted prior to the MPC meeting, suggests rising optimism amongst private sector players. Although the MPC reported a further widening in current account deficit from 1.6% in June 2025 to 2.1% in August 2025 on a 12-month rolling basis, this attests to the September 2025 PMI findings of nascent recovery given the higher importation of intermediate and capital goods as driver of the uptick in the current account balance.
From the February 2025 MPC meeting, the policymakers have strived to finetune the monetary policymaking transmission channel and we point out the 5.5% y/y uptick in credit to the private sector in September 2025, from -2.9% y/y in January 2025, as a fair reward to the effort. The gradual acceptance of Kenya Shilling Overnight Interbank Average (KESONIA) as the base lending rate across the industry by March 2026 will be an icing on the cake of finetuning the monetary transmission mechanism.
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