On 10 February 2026, Kenya’s economic managers sent a carefully calibrated message to markets, investors and households: the country’s recovery is on course — and monetary policy will continue to support it.
In a statement released after its meeting, the Monetary Policy Committee (MPC) of the Central Bank of Kenya (CBK) announced a further easing of the policy rate, citing contained inflation, improving credit growth and a strengthening economic outlook. The meeting was chaired by CBK Governor Kamau Thugge, who has overseen a sustained policy shift toward supporting economic expansion while maintaining price stability.
The decision, widely covered by financial media including Reuters and local outlets such as The Kenya Times, marks another step in what has become a deliberate strategy to stimulate growth without reigniting inflationary pressures.
Inflation Within Target — and Stable. A key pillar of the MPC’s confidence is inflation.
According to the Committee, inflation remained comfortably within the CBK’s target range in January 2026, easing to about 4.4 percent. This moderation has been attributed to stable food prices, improved fuel cost dynamics and prudent fiscal coordination.
For policymakers, anchored inflation expectations create room to act. When price pressures are subdued and predictable, interest rate reductions can be deployed to boost credit uptake and investment without destabilising the economy.
Governor Thugge noted in the statement that the overall inflation outlook remains stable in the near term, barring unexpected external shocks such as global oil price spikes or adverse weather conditions affecting agriculture.
Credit Growth Reawakens.
Beyond inflation, the MPC pointed to improving private sector credit growth as evidence that monetary transmission is gaining traction.
Private sector credit growth rose to approximately 6.4 percent by January 2026 — a notable improvement compared to the subdued lending environment seen in 2023 and early 2024. Commercial banks are gradually adjusting lending rates downward in response to previous policy cuts, encouraging businesses and households to borrow for expansion, consumption and investment.
For small and medium enterprises (SMEs), which form the backbone of Kenya’s economy, cheaper credit translates into expanded working capital, equipment purchases and job creation. For SACCOs and cooperative-linked enterprises, it means improved liquidity conditions and stronger member borrowing activity.
The MPC also highlighted improvements in the banking sector’s asset quality, with non-performing loans showing signs of stabilisation. This strengthens confidence in financial sector resilience — a crucial foundation for sustainable growth.
A Growth Trajectory Regaining Momentum.
Kenya’s real GDP growth, according to the MPC statement, expanded by about 4.9 percent in the third quarter of 2025. The Committee projects growth of 5.5 percent in 2026 and 5.6 percent in 2027, supported by services, industry and a recovering agricultural sector.
These projections suggest a country gradually regaining momentum after navigating global headwinds that included high international interest rates, currency volatility and geopolitical uncertainty.
Foreign exchange reserves, standing at roughly 5.3 months of import cover, further reinforce macroeconomic stability. This buffer provides confidence to investors and cushions the economy against external financial shocks.
Fine-Tuning Policy Transmission.
Interestingly, the February statement went beyond the headline rate decision. The MPC approved adjustments aimed at improving the effectiveness of monetary policy transmission — including narrowing the interest rate corridor around the Central Bank Rate and aligning the Discount Window rate.
The Committee also referenced progress toward full implementation of the Risk-Based Credit Pricing Model (RBCPM), expected to strengthen the link between the policy rate and commercial lending rates. This reform seeks to ensure that policy decisions are felt more directly in the real economy, particularly by borrowers.
For analysts, this signals a central bank not only lowering rates, but also refining the plumbing of the financial system to ensure its decisions have measurable impact.
Balancing Growth and Prudence.
While the MPC’s move was widely anticipated, it was not without debate. Some financial sector observers had argued for a pause in rate cuts to assess the full impact of earlier reductions. Yet the Committee concluded that the prevailing conditions — subdued inflation and strengthening credit — justified continued easing.
The message is clear: Kenya’s central bank is attempting to walk a careful line between stimulating growth and preserving stability.
In the broader context of Kenya’s economic ambitions — from industrial expansion to cooperative sector growth and digital financial innovation — the MPC’s February decision forms part of a wider macroeconomic narrative. The government’s development agenda depends heavily on affordable credit, investor confidence and macro stability.
As 2026 unfolds, the durability of this recovery will depend not only on monetary policy, but also on fiscal discipline, global conditions and domestic productivity gains.
For now, however, the signal from the Central Bank is one of cautious optimism: Kenya’s economy is stabilising, growth is strengthening, and monetary policy will continue to support the journey — carefully, deliberately, and with an eye firmly on price stability.
