The Central Bank of Kenya (CBK) has retained its benchmark lending rate at 8.75 per cent for the third consecutive Monetary Policy Committee (MPC) meeting, holding steady even as risks from the ongoing conflict in the Middle East cloud the global economic outlook.
The MPC, which met on Tuesday, August 11, said the decision follows two earlier holds in April and June after a quarter-point cut in February brought the Central Bank Rate down from 9 to 8.75 per cent. The committee said the current stance remains appropriate for keeping inflation expectations anchored and the shilling stable.
“The current monetary policy stance, with the Central Bank Rate unchanged at 8.75 per cent, remains appropriate to ensure that inflation expectations remain anchored within the target range,” the MPC said in its statement.
Kenya’s overall inflation rose slightly to 6.5 per cent in July from 6.4 per cent in June, while core inflation ticked up marginally to 3.2 per cent. Non-core inflation eased to 15 per cent, helped by government fuel subsidies and a temporary cut in VAT on petroleum products.
Food prices remained a sticking point, with the MPC citing higher costs for Irish potatoes, tomatoes, kale, cabbage and onions as keeping food inflation elevated. The committee said it expects inflation to stay within target in the near term, provided the Middle East conflict de-escalates.
The CBK warned that the conflict has pushed up energy prices and transport costs, dragging projected global growth down to 3 per cent in 2026 from 3.5 per cent in 2025, while global inflation is expected to climb to 4.7 per cent from 4.1 per cent.
Despite the external pressure, Kenya’s economy expanded by 5.3 per cent in the first quarter of 2026, up from 4.9 per cent a year earlier, with CBK projecting full-year growth of 4.9 per cent. Private sector credit grew 10.2 per cent in July, and average commercial lending rates fell to 14.3 per cent, while non-performing loans dropped to 14.6 per cent of gross loans.
The decision follows a call from the Kenya Bankers Association to hold the rate steady, arguing that anchored inflation and a stable shilling made the current stance appropriate. Foreign exchange reserves stood at $15.249 billion, equivalent to 6.3 months of import cover, though the current account deficit widened to 3 per cent of GDP.
The MPC will reconvene in October 2026, saying it remains ready to act if global conditions shift.
