Key questions:
  1. What drove the recent surge in Kenya’s lending rates? 
  2. How will the increase in effective interest rates affect consumers, businesses and the broader Kenyan economy?

Commercial bank lending rates have increased by over 100 basis points to 14.63% y-o-y as a complementary move to the Central Bank of Kenya’s (CBK) monetary tightening stance.  



At its first monetary policy committee (MPC) meeting in 2024, the CBK further increased its policy rate by 50 basis points (bps), setting the interest rates at 13%, a level not seen since September 2012. This move follows the substantial rate increase of 200 bps in December 2023, marking eight consecutive months of a hawkish policy stance by the CBK. In contrast to its Sub-Saharan African counterparts, such as the Bank of Ghana (BoG), which cut rates, and the South African Reserve Bank (SARB), which kept rates unchanged, the CBK has consistently leaned towards monetary tightening measures.


Under its new leadership, the CBK has also intensified its forward guidance approach to taming inflationary pressures in the country. Throughout H2 2023, Kenya’s headline