The Central Bank of Kenya (CBK) Monetary Policy Committee (MPC) has retained the Central Bank Rate (CBR) at 8.75 per cent, citing a stable inflation outlook, a resilient shilling, and sustained economic growth. The decision was announced during the MPC meeting held on October 7, 2026.
The committee noted that Kenya’s overall inflation remained within the government’s target range, easing to 6.8 per cent in September 2026 from 6.6 per cent in August.
Core inflation, which excludes volatile food and energy prices, rose to 4.0 per cent from 3.4 per cent, driven by higher prices of processed foods such as milk, wheat products, and edible oils. Non-core inflation declined to 14.0 per cent from 14.7 per cent, reflecting lower vegetable and energy price inflation.
“Government interventions, including subsidies and the temporary reduction of VAT on fuel, continue to mitigate inflationary pressures,” the MPC stated in its press release.
The committee added that overall inflation is expected to remain within the target range in the near term, supported by appropriate monetary policy actions, government interventions, and a stable exchange rate.
Global risks and domestic resilience
The MPC highlighted that global growth is projected to moderate in 2026 due to higher energy prices stemming from the conflict in the Middle East. Elevated trade policy uncertainty and the Russia-Ukraine conflict remain key risks. Global inflation is expected to rise, with central banks in major economies remaining cautious, some making modest upward adjustments to policy rates.
Despite these external pressures, Kenya’s economic growth projection for 2026 has been revised upwards to 5.0 per cent from 4.9 per cent, reflecting stronger industry and services sectors. This is up from 4.6 per cent in 2025. Growth in 2027 is projected to remain unchanged at 5.3 per cent.
“The September 2026 Market Perceptions Survey and Agriculture Sector Survey show that most respondents expect some moderate upward pressure on inflation due to high fuel prices, arising from the conflict in the Middle East,” the report noted.
However, respondents expect inflation to remain within the target range due to exchange rate stability and an expected decline in food prices following predicted above-average rainfall between October and December 2026.
Business optimism and credit growth
The CEOs Survey and Market Perceptions Survey conducted in September 2026 revealed sustained optimism about business activity and economic growth prospects for the next 12 months. The optimism was attributed to continued macroeconomic stability, increased government infrastructure spending, digital innovations, and improved private sector credit growth.
Growth in commercial banks’ lending to the private sector remained strong at 10.6 per cent in September 2026, compared to 10.3 per cent in August 2026 and -2.9 per cent in January 2025. Average commercial banks’ lending rates stood at 14.4 per cent in September 2026, down from 17.2 per cent in November 2024.
The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios. The ratio of gross non-performing loans (NPLs) to gross loans stood at 13.9 per cent in September 2026, down from 14.8 per cent in June 2026 and 17.6 per cent in August 2025.
External sector and reserves
The current account deficit is estimated at 3.1 per cent of GDP in the 12 months to August 2026, compared to 2.1 per cent in a similar period in 2025, due to a higher trade deficit and lower secondary income transfers. Goods exports increased by 11.8 per cent, driven by horticulture, tea, and machinery. Goods imports increased by 15.8 per cent, reflecting higher imports of food, mineral fuels, and intermediate and capital goods.
The CBK foreign exchange reserves currently stand at USD 14,702 million (5.9 months of import cover), providing adequate cover against short-term shocks.
“Having considered these developments, the Committee concluded that the current monetary policy stance, with the Central Bank Rate unchanged at 8.75 percent, remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable,” the MPC stated.
The committee will meet again in December 2026.
