The Central Bank of Kenya (CBK) left its benchmark interest rate unchanged at 8.75% on 7 October 2026, keeping policy steady for a fourth consecutive meeting as inflation crept towards the upper end of its target range and higher global energy prices clouded the outlook. In a statement, the bank said its Monetary Policy Committee (MPC) “retained the Central Bank Rate (CBR) at 8.75 percent at its October 7, 2026 meeting.”
What happened
According to the MPC press release, the committee judged that the current policy stance remained appropriate to keep inflation expectations anchored within the target range and to support a stable exchange rate. It said it expected inflation to stay within the target band in the near term, helped by monetary policy, government measures and a steady shilling, and that it would continue to monitor global oil prices and any second-round effects on domestic prices.
The committee also raised its growth forecast for 2026 to 5.0%, from 4.9% previously, and projected growth of 5.3% in 2027. The economy grew 4.6% in 2025, according to the release.
Key figures
- Central Bank Rate: 8.75%, unchanged
- Overall inflation, September 2026: 6.8%, up from 6.6% in August (target range 2.5%–7.5%)
- Core inflation: 4.0%, up from 3.4%
- Non-core inflation: 14.0%, down from 14.7%
- GDP growth forecast: 5.0% for 2026 (previously 4.9%); 5.3% for 2027
- Current account deficit: 3.1% of GDP in the 12 months to August 2026, compared with 2.1% a year earlier; projected at 3.2% for 2026
- Goods exports: up 11.8% in the 12 months to August; goods imports up 15.8%
- Foreign exchange reserves: US$14,702 million, equivalent to 5.9 months of import cover
- Private sector credit growth: 10.6% in September, from 10.3% in August
Background
The CBK last cut its policy rate in February 2026, according to The Rio Times, and has held it at 8.75% at each meeting since. The pause reflects a shift in the inflation picture. Headline inflation of 6.8% in September is still inside the bank’s 2.5% to 7.5% range, but Trading Economics noted it was the highest reading since January 2024.
The CBK attributed much of the pressure to external factors. Its release said global growth was expected to moderate in 2026 because of higher energy prices linked to the conflict in the Middle East, and that global inflation was likely to rise on the back of energy and food costs. At home, food inflation rose in September on higher prices for edible oils, cereals and sugar. Non-core inflation eased slightly, partly because of lower energy price inflation, which the bank linked in part to a temporary government cut in value added tax on fuel.
Core inflation, which strips out food and energy, rose to 4.0% from 3.4%. That increase is notable because it suggests price pressures are spreading beyond the most volatile categories.
Analysis: what it means
The decision places Kenya among a number of emerging-market central banks that have halted easing cycles as an energy price shock works through the global economy. With inflation only 0.7 percentage points below the top of its range, the CBK has limited room to resume rate cuts without risking a breach of its target, but it also appears reluctant to tighten while growth is improving and credit to the private sector is recovering.
The external accounts are a source of both strength and concern. Reserves of nearly US$14.7 billion, covering 5.9 months of imports, give the central bank a buffer to defend the shilling against shocks. However, the current account deficit has widened to 3.1% of GDP as imports grow faster than exports, a trend that higher oil prices would tend to reinforce because Kenya relies on imported petroleum products.
Much now depends on fiscal measures and oil prices. The temporary fuel VAT cut has helped contain energy inflation, but its eventual expiry, or a further rise in crude prices, could push headline inflation towards or above the upper limit. The rise in core inflation will also be watched closely, since persistent underlying price growth would be harder for the bank to dismiss as a temporary shock. The MPC’s next meeting is scheduled for December 2026.
