Nairobi — Kenya’s central bank kept its benchmark interest rate unchanged at 8.75%, signalling confidence that inflation will remain within the government’s target range despite a recent rise in consumer prices.
The decision by the Central Bank of Kenya (CBK) marks the fourth consecutive policy meeting at which the rate has been held steady.
Kenya’s annual inflation rate rose to 6.8% in September, up from 6.6% in August, bringing it closer to the upper end of the government’s preferred 2.5%-7.5% range.
Nine of 11 economists surveyed by Reuters had expected the central bank to maintain the rate, while two had forecast an increase to 9.0%.
The CBK said government measures, including subsidies and a temporary reduction in VAT on fuel, were helping to contain inflationary pressures.
Growth outlook improves slightly
Despite persistent inflation risks, the central bank marginally upgraded its economic growth forecast for 2026 to 5.0%, from its previous projection of 4.9% made in August.
The outlook, however, remains exposed to weather-related risks, with the bank identifying the El Niño weather phenomenon as a key threat to economic activity.
For an economy where agriculture remains important to employment, household incomes and food prices, adverse weather conditions could place additional pressure on both inflation and growth.
Current account deficit expected to widen
The central bank also expects Kenya’s current account deficit to widen to 3.2% of GDP in 2026, compared with 2.1% of GDP in 2025.
A wider current account deficit indicates that the country is expected to spend more on imports and other external payments relative to its earnings from exports, services and income from abroad.
The combination of rising inflation, a wider external deficit and weather-related risks will remain important considerations for policymakers as Kenya seeks to sustain economic growth while maintaining macroeconomic stability.
Source: Reuters
Reporting: George Obulutsa
Editing: Alexander Winning&Toby Chopra
