The Central Bank of Kenya’s monetary policy committee held the Central Bank Rate at 8.75 percent on October 7, the eighth consecutive meeting with no change, while nudging its 2026 growth projection up to 5.0 percent from 4.9 percent, with 5.3 percent penciled in for 2027 against 4.6 percent in 2025. The upgraded outlook rests on stronger industry and services performance, and the committee cited sustained business optimism from its September surveys.
Inflation is the reason the rate stays put rather than falling. Headline inflation rose to about 4 percent in September on elevated food prices including milk, edible oils and wheat, though non-core inflation eased to 14 percent from 14.7 percent on lower vegetable and energy prices. Governor Kamau Thugge expects overall inflation to stay within the 5 plus-or-minus 2.5 percent target range in the near term, supported by fuel subsidies, a reduced VAT on fuel and a stable shilling, but flagged prolonged geopolitical tensions, trade policy uncertainty and a possible El Nino as risks. The committee stands ready to act if Middle East oil prices push second-round effects through.
Transmission is slowly working: private-sector credit grew 10.2 percent in July versus a contraction in early 2025, average commercial lending rates fell to 14.3 percent in July from 17.2 percent in November 2024, and gross non-performing loans eased to 14.6 percent of loans from 17.6 percent last August. Foreign exchange reserves stood at $15.249 billion, about 6.3 months of import cover, while the current account deficit widened to 3.1 percent of GDP in the year to August.