The Central Bank of Kenya (CBK) has held its benchmark lending rate unchanged for a fourth straight time since February at 8.75 percent as inflation remains contained within the target range amid shocks from the Middle East war.
The monetary authority has attributed the decision to hold rates to the expectation that inflation will remain below the 7.5 percent ceiling even as consumer prices creep up on a month-over-month basis.
The CBK has also revised its growth outlook for 2026 to five percent from 4.9 percent, underlining economic resilience, particularly in the industry and services sectors, against the backdrop of a similar upgrade by the World Bank.
Private sector credit growth has continued to accelerate, touching 10.6 percent in September from 10.3 percent in August, reflecting the continued transmission of previous rate cuts while bank non-performing loans have also declined.
“Overall inflation is expected to remain within the target range within the target range in the near term. This will be supported by appropriate monetary policy actions, government interventions and a stable exchange rate,” CBK said in a statement on Wednesday.
Core inflation, which measures non-food, non-fuel inflation, hit four percent in September from 3.4 percent in August on higher prices for processed foods like milk, wheat products and edible oils, while non-core inflation fell slightly to 14 percent from 14.7 percent in the same period.
The CBK’s market perception survey conducted in September revealed underlying inflationary pressures from higher fuel prices but projected a moderation in food costs on ample rainfall in the four quarter of 2026.
“Respondents expect inflation to remain within the target range in the near term, due to exchange rate stability, and an expected decline in food prices due to the predicted above-average rainfall between October and December 2026,” CBK added.
CBK’s retention of the policy rate aligns with a cautious stance adopted by global central banks as they continue to assess the impact of the Middle East conflict on inflation and growth.
Prior rate cuts by CBK continue to transmit in the economy as private sector credit growth accelerates further while the banking sector non-performing loans ratio has improved, falling to 13.9 percent in September from 14.8 percent in June.
