NAIROBI, April 9 – Kenya’s Central Bank has retained its benchmark interest rate at 8.75%, pausing an easing cycle that has run for nearly two years as policymakers assess rising global risks linked to tensions in the Middle East.
The decision, announced by Central Bank Governor Kamau Thugge after the latest Monetary Policy Committee meeting, comes amid concerns that the ongoing conflict involving Iran could disrupt global supply chains and push up energy prices, with implications for domestic inflation.
Headline inflation edged up slightly to 4.4% in March from 4.3% in February, remaining within the bank’s target range of 2.5% to 7.5% with authorities saying that holding the rate steady will help anchor price stability while supporting exchange rate too.
Despite the marginal increase, inflation pressures have been contained by stable food prices, supported by favourable weather conditions, alongside a relatively steady currency.
However, the MPC noted that higher fuel costs could test the upper band of the target range in the coming months.
The rate hold follows a series of 10 consecutive cuts since August 2024, amounting to a cumulative 425 basis points. The pause mirrors a broader trend among central banks globally and across Africa, where policymakers are maintaining current positions while monitoring external shocks.
On the external front, Kenya’s foreign exchange reserves stood at $13.7 billion in early April, covering close to six months of imports. Meanwhile, the shilling has weakened modestly by 0.7% this year, briefly crossing the 130 mark against the dollar.
The central bank also revised its 2026 growth forecast to 5.3%, down from 5.5%, citing emerging risks.
In addition, the current account deficit is now projected at 3% of GDP, reflecting higher oil import costs, weaker remittances, and slower export growth.
