The Central Bank of Kenya (CBK) has retained its benchmark interest rate at 8.75 percent as inflation remains within the government’s target range despite rising global economic risks.
The Monetary Policy Committee (MPC) kept the Central Bank Rate (CBR) unchanged at 8.75 percent during its meeting on Tuesday, saying the current monetary policy stance remains appropriate.
The decision comes after Kenya’s annual inflation rate rose slightly to 6.5 percent in July from 6.4 percent in June, largely driven by higher food prices.
Prices of key food items, including potatoes, tomatoes, kale, cabbages and onions, remained elevated during the month, increasing pressure on household budgets.
Despite the rise in headline inflation, the CBK said underlying price pressures had eased, with non-core inflation declining marginally to 15 percent in July from 15.1 percent in June.
The decline was partly attributed to lower energy prices following government interventions, including fuel subsidies and a temporary reduction in VAT on fuel.
The central bank said inflation is expected to remain within the target range in the near term, although the outlook remains exposed to developments in the Middle East.
The ongoing conflict in the region has contributed to higher global energy and transport costs, raising concerns that a prolonged escalation could increase inflationary pressure in Kenya.
The CBK said it would continue monitoring developments in the global economy and their potential impact on domestic prices, exchange rates and economic activity.
Global economic growth is expected to slow to 3 percent in 2026, down from 3.5 percent in 2025, according to the central bank.
At the same time, global inflation is projected to rise to 4.7 percent this year from 4.1 percent in 2025, reflecting continued pressure from energy and other commodity prices.
The decision to retain the CBR at 8.75 percent means commercial banks and other financial institutions will continue operating under the existing benchmark rate as the CBK seeks to balance inflation management with economic growth.
The MPC’s decision will be closely watched by businesses and households, particularly borrowers who have faced elevated financing costs in recent years.
A stable policy rate could provide some predictability for businesses planning investments and households servicing loans, while allowing the CBK to retain room to respond to renewed inflationary pressures.
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