The Central Bank of Kenya kept its benchmark rate at 8.75% at the meeting of its Monetary Policy Committee on 7 October, judging that this level remains appropriate to contain inflation expectations and preserve shilling stability. The institution thus extends the pause that began after the rate was cut to 8.75% in February.
Annual inflation came in at 6.8% in September, compared with 6.6% in August, while remaining within the range targeted by the central bank. Core inflation rose from 3.4% to 4%, driven in particular by milk, wheat-based products and cooking oils.
The most volatile component fell from 14.7% to 14%, thanks to slower price rises for vegetables and energy. Subsidies and the temporary reduction in VAT on fuel also limited the pass-through of the oil shock to consumers, according to the committee.
The central bank raised its growth forecast for 2026 to 5%, from 4.9% previously and 4.6% in 2025. It still expects 5.3% in 2027. Industry and services support this revision, while energy prices, trade uncertainty and a possible El Niño episode are the main risks.
Holding the rate avoids an immediate tightening of credit as lending to the private sector accelerates. Annual growth in such lending reached 10.6% in September, after 10.3% in August and a contraction of 2.9% in January 2025. The strongest increases concern trade, construction, agriculture, finance and durable goods.
Average bank lending rates nonetheless remained high at 14.4% in September, compared with 14.3% in August. They remain below the level of 17.2% observed in November 2024. For households and businesses, the monetary signal is therefore stable, but the effective cost of credit still depends on borrower risk and competition between banks.
The current account deficit widened to 3.1% of gross domestic product over the twelve months to August, compared with 2.1% a year earlier. Goods imports rose 15.8%, more than exports, which grew 11.8%. Remittances from the diaspora fell 1.3%.
Foreign exchange reserves stood at 14.702 billion dollars, equivalent to 5.9 months of imports. The committee considers this buffer sufficient against short-term shocks, but will continue to monitor oil and the indirect effects of rising prices before its next meeting, scheduled for December.