The Central Bank of Kenya (CBK) has maintained its benchmark lending rate at 8.75 percent, opting for a cautious approach amid rising inflationary pressures and growing uncertainty in the global economy.
Following a meeting of the Monetary Policy Committee (MPC) held on June 9, 2026, the regulator announced that the current monetary policy stance remains suitable for preserving price stability and supporting economic growth.
Why CBK Kept Interest Rates Unchanged
According to the CBK, the decision was influenced by increased risks to both the domestic and international economic outlook. Rising global energy prices and supply chain disruptions linked to ongoing geopolitical tensions in the Middle East have pushed inflation higher, prompting the bank to maintain the current rate.
Kenya's annual inflation rate rose to 6.7 percent in May 2026, up from 5.6 percent recorded in April. The increase was mainly driven by higher fuel and cooking gas prices, which have had a ripple effect on transportation and the cost of essential goods.
Food and energy prices have also continued to rise, putting pressure on household budgets across the country.
Borrowers Continue to Benefit from Lower Lending Rates
The decision to leave the Central Bank Rate (CBR) unchanged offers some relief to borrowers, as commercial lending rates have continued to decline.
Average lending rates stood at 14.5 percent in May 2026, down significantly from 17.2 percent in November 2024. The reduction has helped improve access to credit for sectors such as agriculture, trade, and construction.
Private sector credit growth has also rebounded strongly, reaching 9.3 percent in May 2026 compared to a contraction of 2.9 percent in January 2025.
Government Measures Help Cushion Consumers
The government has implemented several measures aimed at easing the burden on consumers. These include fuel subsidies and a temporary reduction of Value Added Tax (VAT) on fuel from 16 percent to 8 percent.
CBK noted that these interventions have contributed to stabilizing prices and preventing inflation from rising further.
Economic Growth Forecast Revised Lower
Despite improvements in credit growth and relatively stable financial conditions, the central bank has revised Kenya's economic growth forecast for 2026 to 4.9 percent, down from the earlier estimate of 5.3 percent.
The downward adjustment reflects concerns over external shocks and their potential impact on key sectors such as agriculture and services.
Pressure From Banks to Raise Rates
The decision comes amid calls from the banking sector for a rate increase to curb inflation. The Kenya Bankers Association (KBA) has argued that higher interest rates would help contain rising prices and anchor inflation expectations.
Bankers have warned that persistent inflation could weaken consumer purchasing power, slow economic activity, and create uncertainty within credit markets.
However, CBK appears determined to strike a balance between controlling inflation and ensuring sufficient access to affordable credit, while closely monitoring developments in global energy markets.
Outlook
With inflation remaining within the central bank's target range but showing signs of upward pressure, analysts expect CBK to continue monitoring global developments before making any adjustments to monetary policy.
For now, borrowers and businesses can expect lending rates to remain relatively stable as policymakers seek to safeguard economic growth and maintain financial stability.
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