International oil prices dropped sharply at the beginning of October 2025, with Murban oil prices falling to USD 65.59 per barrel on October 2, down from USD 69.85 per barrel on September 25, according to the latest Central Bank of Kenya (CBK) Weekly Bulletin.

The decline was attributed to market expectations of a potential OPEC+ supply increase, higher U.S. oil inventories, and softer global demand prospects.

The oil market has been under pressure from concerns over oversupply, while sluggish global economic activity continues to weigh on demand.

“Investor caution has also been heightened by ongoing uncertainties in the United States, including the government shutdown, which has dampened overall market sentiment,” the bulletin stated.

The oil decline is significant for both consumers and producers, as it could ease inflationary pressures in oil-importing countries such as Kenya, while reducing revenue for exporters.

Inflation

Kenya’s headline inflation rose slightly in September 2025, reaching 4.6 percent, up from 4.5 percent in August.

The increase was largely driven by non-core inflation, which climbed to 9.6 percent from 9.2 percent the previous month. Core inflation, however, eased to 2.9 percent compared to 3.0 percent in August.

The CBK noted that the uptick in non-core inflation was fueled by higher prices of select vegetable items.

This continues to affect the cost of living, though overall inflation remains within the government’s target range.

Economic Growth

Kenya’s economy expanded by 5.0 percent in the second quarter of 2025, up from 4.6 percent in the same quarter of 2024.

Growth was mainly supported by a rebound in industrial activity, resilience in key service sectors, and stable performance in agriculture.

The industrial sector grew by 4.0 percent, compared to 0.2 percent in 2024, while the services sector rose by 5.7 percent, slightly below the 6.1 percent growth recorded in the same period last year.

This was supported by strong performance in transport, storage, finance, insurance, information and communication, and wholesale and retail trade.

Agriculture remained stable, posting a 4.4 percent growth, compared to 4.5 percent in the same quarter of 2024.

Exchange Rates

The Kenya Shilling remained relatively stable against major global currencies.

As of October 2, 2025, the shilling exchanged at KSh 129.24 per U.S. dollar, compared to KSh 129.26 per dollar on September 25.

This reflects CBK’s continued interventions and a balance between foreign exchange inflows and outflows.

Foreign Exchange Reserves

Kenya’s usable foreign exchange reserves stood at USD 10,717 million, equivalent to 4.7 months of import cover as of October 2.

The CBK emphasized that this level meets its statutory requirement of maintaining at least four months of import cover, ensuring external financial stability.

Money Market

The money market remained liquid in the week ending October 2.

Open market operations were active, with commercial banks holding KSh 5.4 billion in excess reserves above the 3.25 percent cash reserve requirement.

The Kenya Shilling Overnight Interbank Average Rate (KESONIA) fell to 9.51 percent on October 2, down from 9.48 percent on September 25.

The number of interbank deals declined to 30, compared to 31 in the previous week.

Total value traded also dropped to KSh 15.1 billion from KSh 17.2 billion.

Government Securities Market

The Treasury bill auction held on October 2 attracted bids totaling KSh 15.1 billion, against an advertised amount of KSh 24.0 billion, representing a 63.1 percent performance.

Interest rates on the 91-day and 364-day Treasury bills increased marginally, while the 182-day Treasury bill rate remained unchanged.

Equity Market

At the Nairobi Securities Exchange (NSE), share indices registered gains.

The NASI, NSE 25, and NSE 20 share price indices rose by 0.65 percent, 0.92 percent, and 1.00 percent, respectively, in the week ending October 2.

Despite the rise in indices, market capitalization only grew by 0.65 percent.

Equity turnover fell significantly, down 40.48 percent, while total shares traded dropped by 63.53 percent.

Bond Market

Activity in the domestic secondary bond market strengthened, with turnover increasing by 5.96 percent in the week ending October 2.

In international markets, yields on Kenya’s Eurobonds dropped by an average of 7.21 basis points, reflecting improved investor confidence.

Similarly, yields for Angola and Côte d’Ivoire also fell.

Global Trends

Global inflationary pressures persisted, with the Euro Area headline inflation rising to 2.2 percent in September 2025, up from 2.0 percent in August, mainly due to higher food prices.

The U.S. Dollar Index weakened by 0.7 percent during the week, weighed down by investor caution linked to the ongoing U.S. government shutdown.

The combination of higher U.S. inventories, potential OPEC+ supply hikes, and weaker global demand outlook ultimately triggered the decline in international oil prices, underscoring ongoing volatility in global commodity markets.

Fuel pump at a petrol station in Kenya. PHOTO/NTV.