Africa-Press – Kenya. The Central Bank of Kenya has delivered 10 consecutive rate cuts since it began easing in August 2024 and has hinted at further cuts.
This shows us that CBK Governor Kamau Thugge favours gradual but consistent easing, rather than front-loading. Watchful waiting and data-conscious decisions have allowed him to keep cutting, even while the Fed has held.
During the previous inflation cycle, the CBK rate peaked at 13 per cent in early 2024, but now stands at 8.75 per cent. Inflation peaked in late 2022 at near 10 per cent.
It is to be noted that the downward descent of inflation began well before the first rate cut in August 2024.
CBK has clearly favoured inflation-targeting flexibility. Kenya is grappling with what economists call a negative output gap–an economy operating below its potential.
A trend reduction in inflation is one characteristic of an economy operating with excess supply, relative to demand. GDP growth has now fallen below five per cent, while similar economies like Côte d’Ivoire are posting six per cent plus.
With inflation within the 5±2.5% CBK target (4.4% in January 2026), there is further room for rate cuts. The Kenya Shilling has remained stable against the US Dollar since mid-2024, seemingly roofed in by the 130 levels.
However, the dollar has been weakening against other currencies, which may mask moderate to mild Shilling depreciation in that context.
There are several signs of economic recovery. After negative private sector credit growth in much of 2024 and early 2025, it hit 6.3 per cent in November 2025 (January 2026: 6.4%).
CBK is targeting double digits. Following a subdued and mixed period of monthly contractions and relief rallies, PMI has now been in expansion territory for five straight months into January 2026.
The NSE 20 Share Index surged 56 per cent to 3,139.2 points in 2025, its highest annual gain since 2003. Banking sector NPLs are also trending down after peaking in June 2025 at 17.6% (January 2026: 15.5%).
The writer is an investor and entrepreneur.
