The Central Bank of Kenya (CBK) has decided to keep its benchmark lending rate steady at 8.75%, following the Monetary Policy Committee’s (MPC) meeting on August 11, 2026. The decision was led by CBK Governor Dr. Kamau Thugge, who chairs the MPC.

The committee concluded that the current monetary policy stance remains appropriate to anchor inflation expectations and support the stability of the Kenyan shilling amid uncertain global conditions.

Inflation and Economic Performance

  • Inflation in Kenya inched up slightly to 6.5% in July 2026 from 6.4% in June, staying within the government’s target range.
  • Core inflation held steady at 3.2%, while non-core inflation eased marginally to 15.0%, influenced by government measures such as fuel subsidies and a temporary VAT cut on petroleum products.
  • Food inflation remains elevated due to rising prices of key vegetables including Irish potatoes, tomatoes, kale, cabbages, and onions.
  • Kenya’s economy grew by 5.3% in the first quarter of 2026, improving on the 4.9% growth recorded in Q1 2025.
  • Projections indicate economic growth of 4.9% for 2026 and 5.3% for 2027, supported by strong industrial output, resilient services, and steady agricultural production.

Banking Sector and External Outlook

  • Asset quality in banks improved, with the ratio of non-performing loans dropping to 14.6% in July 2026 from 17.6% a year earlier.
  • Private sector credit expanded by 10.2% in July 2026, reversing previous contractions.
  • Commercial bank lending rates declined to an average of 14.3% in July from 17.2% in November 2024.
  • Kenya’s current account deficit widened to about 3.0% of GDP in the year to June 2026, driven by increased imports and a slight fall in diaspora remittances.
  • Foreign exchange reserves stood at USD 15.25 billion, covering 6.3 months of imports.

The MPC highlighted the ongoing Middle East conflict as a key risk to both global and domestic economic outlooks, with global growth expected to slow to 3.0% in 2026 and inflation projected to rise to 4.7%. The committee will continue to monitor oil prices and their impact on inflation ahead of the next meeting scheduled for October 2026.