Kenya holds at 8.75% as core inflation jumps and the oil bill widens the deficit

Serguey Asael Shinder08 October 2026, 07:162 min read

The Monetary Policy Committee of the Central Bank of Kenya kept the Central Bank Rate at 8.75% at its meeting on 7 October, saying the current stance keeps inflation expectations anchored within the target range and the exchange rate stable.

Inflation: headline steady, core up.

• Overall inflation was 6.8% in September, up from 6.6% in August and still within the target range.
• Core inflation jumped to 4.0% from 3.4%, driven by processed foods — milk, wheat products and edible oils.
• Non-core inflation eased to 14.0% from 14.7% as vegetable and energy inflation fell. Subsidies and a temporary VAT cut on fuel are still damping prices.

Growth revised up. The MPC now expects growth of 5.0% in 2026, up from 4.9%, on stronger industry and services, and 5.3% in 2027. Its business surveys show sustained optimism, tempered by high energy costs and the risk of El Niño disruption.

The external account worsens. The current-account deficit is estimated at 3.1% of GDP in the 12 months to August, from 2.1% a year earlier, and is projected at 3.2% for 2026, mainly on higher fuel imports. Diaspora remittances fell 1.3%. Reserves stand at $14.70 billion, 5.9 months of import cover, and the CBK expects a balance-of-payments surplus of about $2.43 billion this year.

Banks and credit. Non-performing loans fell to 13.9% of gross loans in September, from 14.8% in June and 17.6% in August 2025. Private-sector credit growth reached 10.6%, against minus 2.9% in January 2025. Average lending rates were 14.4%, from 17.2% in November 2024.

What it watches. The committee said it will keep monitoring global oil prices and any second-round effects on inflation, and stands ready to take further action as necessary — a hold with an explicit eye on the same risk that pushed other central banks to hike this autumn.