CBK Holds Rate at 8.75% as Private-Sector Credit Returns to Double-Digit Growth

The Central Bank of Kenya held its benchmark interest rate at 8.75% for a fourth consecutive meeting on Tuesday, extending its longest policy pause since 2020 as inflation stayed within target, the shilling remained stable and private-sector credit growth returned to double digits.

• Headline inflation stood at 6.5% in July, little changed from 6.4% in June and within the CBK's target range. Core inflation was 3.2%, while non-core inflation eased marginally to 15.0% from 15.1%.
• CBK attributed the moderation in non-core inflation partly to government interventions, including fuel subsidies and the temporary reduction of VAT on fuel, although food inflation remained elevated due to higher vegetable prices.
• The MPC said it will continue monitoring global oil prices and possible second-round effects on inflation ahead of ts next meeting scheduled for October 2026.

The apex bank expects inflation to remain within target in the near term, assuming the Middle East conflict de-escalates, supported by government interventions, stable food prices and the exchange rate.

The decision matched a recommendation by the Kenya Bankers Association (KBA), which had called for the rate to remain unchanged to allow previous monetary easing to continue feeding through to lending and economic activity. The bankers had advocated a rate increase ahead of the June meeting as the Middle East conflict pushed up oil prices and inflation risks.

Private-sector credit growth jumped to 10.6% in June, its first double-digit reading since February 2024, before easing to 10.2% in July. The recovery has been sharp from a contraction of 2.9% in January 2025 as previous rate cuts increasingly transmit to borrowers.

Average commercial bank lending rates declined to 14.3% in July from 14.4% in June and 17.2% in November 2024. CBK said credit growth remained strong in trade, building and construction, agriculture and consumer durables.