The hold has found further support from the continued exchange rate stability as the Kenyan shilling remains largely unchanged against the US dollar, where it has traded in a narrow-bound range of between 129 and 130 units since the onset of the Middle East crisis.
This is even as Kenya’s official foreign currency reserves come under pressure from an increased fuel import bill and reduced diaspora remittances.
Lending to businesses and households (private sector lending) has also remained robust, climbing back to double-digit levels in the months of June and July 2026 for the first time since February 2024.
The average lending rate by commercial banks stood at 14.3 percent in July, falling from 14.4 percent in June and 17.2 percent in November 2025.
The ease in lending rates has continued despite the pause in monetary policy, revealing the continued transmission of previous cuts into the economy.
The apex bank has credited the new loan-pricing and monetary policy framework for bringing down lending costs.
CBK, however, acknowledges that banks were initially resistant to the changes as they bickered over the choice to adopt the CBR or the Kesonia as the benchmark for pricing loans.
Most banks in the end favoured the CBR over Kesonia, but both rates have since converged as the CBK exercises its other open market operations tool to prop liquidity in the interbank market, keeping the overnight lending rate close to the CBR.
The CBK has an established interest rate corridor where the interbank rate, or Kesonia, hovers at no more than 0.5 percentage points above or below the CBR.
Both the CBR and Kesonia are currently tied at the hip at 8.75 percent.
‘Our original proposal was to have the CBR as the benchmark, but banks complained, saying that we were trying to control interest rates. We allowed them to do so, but today the interbank rate is the same as the policy rate. We are okay with whichever benchmark a bank chooses because this framework has ensured that both the policy rate and Kesonia move in tandem,’ Thugge added.