CBK Announces CBR Rates for Bank Loans

The Monetary Policy Committee (MPC) of the Central Bank of Kenya has retained the Central Bank Rate (CBR) at 8.75 percent following its meeting held on April 8, 2026.

In a press release, the Committee said the decision aims to keep inflation expectations anchored and maintain exchange rate stability. It noted that the current policy stance remains appropriate despite rising global uncertainties.

The MPC pointed to ongoing tensions in the Middle East as a major concern.

“The conflict has disrupted global supply chains, leading to higher energy prices and increased risks to global economic growth,” MPC stated.

The committee added that global growth, initially projected at 3.3 percent in 2026, is now expected to moderate due to inflationary pressures and reduced demand.

Inflation Outlook Shifts

“Global inflation is expected to increase in 2026 on account of higher energy prices and fertiliser costs attributed to the supply disruptions from the conflict,” the committee said, turning to inflation.

It further noted that inflation rates in the major economies have remained above target due to the stickiness in core inflation and the recent increase in energy prices.

Locally, Kenya’s overall inflation stood at 4.4 percent in March 2026, up slightly from 4.3 percent in February but still within the target range. Core inflation remained stable at 2.1 percent.

However, non-core inflation rose to 10.8 percent, driven mainly by higher prices of vegetables such as tomatoes and Irish potatoes.

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Respondents Expect Stable Food Prices

The Committee said respondents to the March 2026 Agriculture Sector Survey expect stable food prices due to favourable weather conditions and exchange rate stability.

However, it noted a shift in expectations, with most respondents now anticipating upward pressure on inflation due to rising global oil prices linked to the Middle East conflict.

According to the March 2026 CEOs Survey and Market Perceptions Survey, businesses remain optimistic about economic growth over the next 12 months. The MPC attributed this optimism to a stable macroeconomic environment, low inflation, and improved credit growth.

Nevertheless, respondents raised concerns about global uncertainties, the high cost of doing business, and weak consumer demand.

Current Account Deficit Widens

The Committee reported that the current account deficit widened to 2.4 percent of GDP in the 12 months to February 2026, up from 1.3 percent in a similar period in 2025.

It linked this increase to a higher trade deficit and lower secondary income transfers.

Despite this, goods exports grew by 8.1 percent, driven by horticulture, tea, and coffee. Diaspora remittances also increased by 1.9 percent, while foreign exchange reserves stood at USD 13,354 million, providing 5.68 months of import cover.

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Banking Sector Remains Stable

The MPC said the banking sector remains stable and resilient, supported by strong liquidity and capital adequacy. However, the ratio of gross non-performing loans rose slightly to 15.6 percent in March 2026.

At the same time, lending to the private sector improved, growing by 8.1 percent in March compared to 7.4 percent in February.

The Committee noted that lower lending rates have supported increased demand for credit across key sectors.

The MPC also highlighted the implementation of the Risk-Based Credit Pricing Model, stating that it is expected to improve the transmission of monetary policy decisions to commercial banks’ lending interest rates and enhance transparency in the pricing of loans by banks.

In its conclusion, the Committee emphasized that the current monetary policy stance will help maintain stability.

It stated that the CBR at 8.75 percent remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable.

The MPC added that it will continue to monitor global and domestic developments closely, particularly the impact of rising oil prices and geopolitical tensions, and stands ready to take further action if necessary.

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