CBK Announces Interest Rate Decision Amid Rising Global Inflation

The Monetary Policy Committee (MPC) has maintained Kenya’s Central Bank Rate (CBR) at 8.75% as the country’s economy continues to show signs of growth.

The committee made the decision during its meeting on Tuesday, August 11, 2026.

The move comes as Kenya continues to manage inflation pressures, rising food prices and uncertainty linked to global economic developments.

The Central Bank of Kenya (CBK) said the Kenyan economy grew by 5.3% in the first quarter of 2026, up from 4.9% during the same period in 2025.

CBK Reports Strong Business Confidence

The CBK said businesses remain optimistic about economic activity and growth over the next 12 months.

The July 2026 CEOs Survey and Market Perceptions Survey showed sustained optimism, which the bank attributed to macroeconomic stability, government support for agriculture, increased infrastructure spending and digital innovation.

Respondents also pointed to a stable exchange rate and improved private-sector credit growth as factors supporting the positive outlook.

However, businesses raised concerns over global uncertainty linked to the conflict in the Middle East and high energy costs.

Current Account Deficit Widens

The CBK reported that Kenya’s current account deficit rose to 3.0% of GDP in the 12 months to June 2026, compared with 1.9% during a similar period in 2025.

The bank attributed the increase to a higher trade deficit and lower secondary income transfers.

Goods exports increased by 8.9%, supported mainly by horticulture, tea, machinery and transport equipment.

At the same time, goods imports rose by 13.1%, driven by higher imports of food, mineral fuels, intermediate goods and capital equipment.

Services receipts also increased by 8.3%, mainly due to higher travel earnings, while diaspora remittances declined by 2.4%.

The CBK projects the current account deficit to reach 3.0% of GDP in 2026, up from 2.1% in 2025.

The bank said the deficit will be more than fully financed by financial and capital inflows, resulting in an overall balance of payments surplus of $2.485 billion in 2026.

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Foreign Reserves Remain Strong

Kenya’s foreign exchange reserves stood at $15.249 billion, equivalent to about 6.3 months of import cover.

The CBK said the reserves will continue to provide adequate cover and act as a buffer against short-term domestic and external shocks.

The bank also noted that most respondents in the July 2026 Agriculture Sector Survey expect inflation to remain within the target range in the near term.

The outlook is supported by expectations of stable food and fuel prices and a stable exchange rate.

However, some respondents expect moderate upward pressure on inflation due to concerns over higher international oil prices arising from the Middle East conflict.

Banking Sector Remains Stable

The CBK said Kenya’s banking sector remains stable and resilient, supported by strong liquidity and adequate capital levels.

The ratio of gross non-performing loans (NPLs) to gross loans fell to 14.6% in July 2026, from 15.4 per cent in April and 17.6% in August 2025.

The bank recorded declines in non-performing loans in the manufacturing, building and construction, trade, agriculture and real estate sectors.

“Banks have continued to make adequate provisions for the NPLs,” the CBK said.

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Private Sector Credit Growth Improves

Commercial banks’ lending to the private sector also remained strong.

Private-sector credit grew by 10.2% in July 2026, compared with 10.6% in June and a contraction of 2.9 % in January 2025.

The CBK said credit growth remained strong in key sectors, including trade, building and construction, agriculture and consumer durables.

The bank linked the increased demand for credit to a decline in lending interest rates.

Average commercial bank lending rates stood at 14.3% in July 2026, down from 14.4% in June and 17.2% in November 2024.

MPC to Monitor Global Oil Prices

The MPC said it will continue monitoring global oil prices and their possible impact on inflation.

“The Committee stands ready to take further action as necessary in line with its mandate,” the CBK said.

The committee also considered the implementation of the FY2025/26 Supplementary Budget II, the FY2026/27 Budget and the government’s planned fiscal consolidation strategy aimed at reducing debt vulnerabilities over the medium term.

The MPC concluded that maintaining the CBR at 8.75% remains appropriate to keep inflation expectations anchored within the target range and support exchange rate stability.

The committee will meet again in October 2026.

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