NAIROBI, Aug 12 – Kenya’s central bank kept its benchmark interest rate unchanged at 8.75% on Tuesday, maintaining its policy stance for a third consecutive meeting as inflation remains within the government’s target range but global energy risks persist.
The Central Bank of Kenya said its current policy position remained appropriate, while highlighting the need to monitor movements in global oil prices and potential second-round effects on domestic inflation. The decision was in line with market expectations, with all seven economists surveyed by Reuters forecasting no change.
Kenya’s annual inflation rate edged up to 6.5% in July from 6.4% in June, remaining within the government’s preferred range of 2.5% to 7.5%. Inflation had been running at around 4% before the escalation of the Iran conflict, but increased sharply in April and May following higher domestic fuel prices before settling above 6%.
The central bank’s decision reflects the balance policymakers face between containing inflation and supporting economic activity. While price pressures have remained manageable within the target band, movements in international oil markets could feed into transport, production and consumer prices, creating additional inflationary pressure.
The bank also maintained its economic growth projections, forecasting Kenya’s economy to expand by 4.9% in 2026 and 5.3% in 2027.
East Africa’s largest economy has continued to record growth of around 5% annually, supported by relatively steady domestic activity. However, policymakers continue to face external risks, including a prolonged conflict in the Middle East that could disrupt energy markets and increase import costs.
Weather conditions also remain a concern. The central bank identified potential adverse effects from the El Niño weather phenomenon as another risk to the economic outlook, particularly through its implications for agricultural production, food prices and broader economic activity.
The latest rate decision therefore leaves Kenya’s monetary policy unchanged while authorities assess whether current inflationary pressures remain temporary or could become more persistent. Future movements in global oil prices and their impact on domestic prices will remain important factors for the central bank as it considers its next policy steps.
