For the third consecutive monetary policy meeting, Kenya's Central Bank (CBK) kept its benchmark rate unchanged at 8.75%. A widely expected decision — but one that masks a persistent tension between solid growth and stubbornly high non-core inflation.
Steady rates in a pressured environment
Meeting on August 11, 2026, the CBK Monetary Policy Committee confirmed the Central Bank Rate (CBR) at 8.75%. In its statement, the bank justified the hold by the need to ensure that «inflation expectations remain anchored within the target range and that the exchange rate remains stable». Average commercial bank lending rates eased slightly to 14.3% in July 2026, down from 14.4% in June — a marginal softening that offers modest relief to borrowers.
Headline inflation contained, but non-core remains a concern
Overall inflation edged up to 6.5% in July 2026 (from 6.4% in June), remaining within the CBK's target band of 5% ±2.5 percentage points. Core inflation stood at 3.2%, indicating domestic demand remains in check. The blind spot is non-core inflation — driven primarily by energy and fuel — which came in at 15.0% in July versus 15.1% in June. The CBK flagged escalating Middle East tensions, persistently high energy prices, and the El Niño weather phenomenon as primary downside risks.
Growth holding steady
Kenya's economy expanded by 5.3% in Q1 2026, up from 4.9% in Q1 2025 — a meaningful acceleration. The 2026 full-year growth forecast stands at 4.9%, with a recovery to 5.3% projected for 2027. Foreign exchange reserves hold at $15.249 billion, providing 6.3 months of import cover — well above the East African Community's 4-month prudential threshold.
Why it matters
Kenya is East Africa's leading commercial and financial partner. A stable benchmark rate signals confidence to regional markets and foreign investors. For Indian Ocean businesses operating along Kenya-OI corridors, credit costs at 14.3% remain elevated — but if the gradual downward trend holds through H2 2026, exporting SMEs could see meaningful relief heading into 2027.
Sources: Central Bank of Kenya (CBK), monetary policy statement August 11, 2026; Kenya Times.