Kenya's central bank holds benchmark rate at 8.75%; September inflation rises to 6.8%

The Central Bank of Kenya (CBK) kept its benchmark Central Bank Rate (CBR) at 8.75 per cent on 7 October 2026, saying the current stance remains appropriate to keep inflation expectations within the target range and the exchange rate stable.

The decision was taken by the CBK's Monetary Policy Committee (MPC), whose chairman, Dr Kamau Thugge, signed the press release. Business Daily reported on 7 October that the CBK had held the rate for a fourth straight time since February.

The MPC said overall inflation stood at 6.8 per cent in September, up from 6.6 per cent in August, and remained within the target range. Core inflation rose to 4.0 per cent from 3.4 per cent, driven by higher prices of some processed foods, particularly milk, wheat products and edible oils.

Non-core inflation fell to 14.0 per cent in September from 14.7 per cent in August, which the committee attributed mainly to lower vegetable and energy price inflation. It said government subsidies and the temporary reduction of VAT on fuel continue to ease inflationary pressures.

The CBK revised its projected 2026 economic growth up to 5.0 per cent from 4.9 per cent, citing stronger industry and services sectors. It put growth in 2025 at 4.6 per cent and left the 2027 projection unchanged at 5.3 per cent. The MPC named prolonged geopolitical tensions, trade policy uncertainty and the possible severe impact of El Niño as risks to that outlook.

On lending, the press release said average commercial bank lending rates stood at 14.4 per cent in September, compared with 14.3 per cent in August and 17.2 per cent in November 2024. Growth in bank lending to the private sector was 10.6 per cent in September, against 10.3 per cent in August and -2.9 per cent in January 2025.

The ratio of gross non-performing loans to gross loans was 13.9 per cent in September 2026, down from 14.8 per cent in June 2026 and 17.6 per cent in August 2025. The committee described the banking sector as stable and resilient.

The MPC estimated the current account deficit at 3.1 per cent of GDP in the 12 months to August 2026, compared with 2.1 per cent a year earlier, because of a larger trade deficit and lower secondary income transfers as a share of GDP. Goods exports rose 11.8 per cent, led by horticulture, tea, and machinery and transport equipment, while goods imports rose 15.8 per cent. Diaspora remittances fell 1.3 per cent.

The CBK projects the 2026 current account deficit at 3.2 per cent of GDP, against 2.1 per cent in 2025, mainly because of higher mineral fuel imports on higher international oil prices and lower remittances. It expects an overall balance of payments surplus of US$2,426 million in 2026.

The CBK's foreign exchange reserves stand at US$14,702 million, which it put at 5.9 months of import cover. Kenyans.co.ke reported on 7 October that the shilling has held at around KSh 129 to the dollar since April.

The committee said global growth is projected to moderate in 2026 because of higher energy prices arising from the conflict in the Middle East, and that global inflation is expected to rise this year, mainly on higher energy and food prices. It said it will keep monitoring global oil prices and any second-round effects on inflation, and stands ready to take further action if needed.

The MPC will meet again in December 2026.