A slight rise in Kenya's inflation has not convinced the Central Bank of Kenya (CBK) to change its key interest rate, with the regulator maintaining the Central Bank Rate at 8.75 per cent as it keeps a close watch on food and energy prices.
The decision was reached by the Monetary Policy Committee (MPC) during its August 11 meeting, with the committee saying the current rate remains suitable for keeping inflation within the target range while supporting stability in the foreign exchange market.
The MPC said the global economic outlook has weakened, with growth now expected to come in at 3.0 per cent in 2026 compared to 3.5 per cent recorded in 2025.
It linked the expected slowdown partly to increased energy costs arising from the ongoing conflict in the Middle East, which has raised concerns about further pressure on prices around the world.
"Having considered these developments, the Committee concluded that the current monetary policy stance, with the Central Bank Rate unchanged at 8.75 per cent, remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable," the statement read in part.
CBK said it will keep assessing movements in oil prices and any wider effects they may have on inflation. It will also assess developments in the local and international economies before deciding whether further action is needed.
"The MPC noted that there is need to continue monitoring the evolution of global oil prices and any second-round effects on inflation, as well as other developments in the global and domestic economies, and stands ready to take further action as necessary in line with its mandate. The Committee will meet again in October 2026," CBK said.
The MPC also expects the global inflation rate to climb to 4.7 per cent this year, compared with 4.1 per cent in 2025.
"Global inflation is expected to increase to 4.7 percent in 2026 from 4.1 percent in 2025 on account of higher energy prices and transport costs. Inflation rates in most major economies have increased in recent months, and remained above their respective targets, due to higher energy prices and stickiness of core inflation rates," it added.
Domestically, CBK reported that inflation remained within the country's target range in July, although it moved slightly higher from 6.4 per cent in June to 6.5 per cent.
Core inflation, which excludes some items whose prices tend to change sharply, remained at 3.2 per cent. Non-core inflation, meanwhile, dropped marginally from 15.1 per cent to 15.0 per cent.
Food costs continued to present a challenge, with the regulator reporting increased prices for several vegetables, including Irish potatoes, tomatoes, kale, cabbage and onions.
"The food inflation component remained elevated on account of higher vegetable prices, particularly Irish potatoes, tomatoes, kales, cabbages, and onions. Overall inflation is expected to remain within the target range in the near term, assuming a de-escalation of the conflict in the Middle East."
The committee said the inflation outlook would remain favourable in the short term if the situation in the Middle East improves, food prices remain stable and the exchange rate does not face major pressure.
The decision also follows a call by the Kenya Bankers' Association (KBA) for CBK to leave the rate unchanged.
KBA had argued that retaining the 8.75 per cent rate would help support credit to the private sector, promote stability of the shilling and maintain inflation at manageable levels.
The association noted that inflation had only moved from 6.4 per cent in June to 6.5 per cent in July despite uncertainty in the international economy.
"With inflation anchored, as well as exchange rate stability, we view that maintaining the current stance of monetary policy in keeping the CBR unchanged at 8.75 per cent would be appropriate," KBA stated in a statement on Friday, August 7.