Kenya’s central bank left its benchmark lending rate unchanged on Tuesday, opting to maintain a cautious stance as rising fuel costs push inflation closer to the upper limit of the government’s target range.
The Central Bank of Kenya (CBK) held its policy rate at 8.75 percent, in line with market expectations, while signalling that policymakers remain alert to the inflationary impact of higher global oil prices linked to tensions in the Middle East.
The decision marks the second consecutive monetary policy meeting at which the rate has been left unchanged, following a series of cuts aimed at supporting economic activity.
The bank’s Monetary Policy Committee (MPC) said the current policy stance was appropriate to keep inflation expectations under control and preserve exchange-rate stability.
“The MPC noted that there is a need to continue monitoring the evolution of global oil prices and any second-round effects on inflation,” the central bank said in a statement after the meeting.
Inflation has accelerated in recent months, largely due to rising fuel costs following a sharp increase in global energy prices amid the conflict involving Iran.
Annual inflation stood at 6.7 percent in May, up from earlier levels and edging closer to the upper boundary of the government’s preferred range of 2.5 percent to 7.5 percent.
While inflation remains within the target band, analysts say sustained increases in fuel prices could place additional pressure on transport costs and consumer prices in the coming months.
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The central bank said maintaining the benchmark rate would help ensure inflation remains anchored within the target range while supporting macroeconomic stability.
The decision was widely anticipated by economists, most of whom had forecast that policymakers would keep borrowing costs unchanged as they assess the impact of recent global developments on the domestic economy.
Alongside the rate decision, the CBK lowered its economic growth forecast for 2026, citing emerging risks to the outlook.
The bank now expects the economy to expand by 4.9 percent this year, down from its previous forecast of 5.3 percent.
The revised projection reflects concerns over weaker external demand, elevated energy costs and uncertainty in the global economic environment.
Kenya’s economy has shown resilience in recent years, supported by agriculture, services and infrastructure investment. However, policymakers face growing challenges from higher import costs, external shocks and persistent global uncertainty.
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The East African nation imports most of its petroleum products, making it vulnerable to fluctuations in international oil markets. Rising fuel prices can quickly feed into transport, manufacturing and food costs, complicating efforts to keep inflation under control.
Despite the upward pressure on prices, the central bank indicated that current monetary conditions remain sufficient to safeguard price stability while supporting economic growth.
Investors and businesses will now look ahead to remarks expected from Central Bank Governor Kamau Thugge on Wednesday, when he is scheduled to provide further details on the policy decision and the economic outlook.
The central bank’s next monetary policy meeting is scheduled for August. Policymakers said they remain prepared to act should inflationary pressures intensify or economic conditions deteriorate.
“The MPC stands ready to take further action as necessary in line with its mandate,” the bank said.
