Pricing strategy: Relief as Central Bank of Kenya holds base loan rates
This story has significance for readers across Kenya and beyond.
- Kenya's Monetary Policy Committee met on August 11, 2026, to review the country's monetary policy stance amid rising global uncertainties
- Kenya's inflation held broadly stable at 6.5% in July 2026, remaining within the government's target range despite elevated food prices
- CBK Governor Kamau Thugge chaired the meeting as the economy posted 5.3% growth in Q1 2026, above the previous year's pace
The Central Bank of Kenya (CBK) has kept its benchmark lending rate unchanged, with the Monetary Policy Committee (MPC) voting to hold the Central Bank Rate (CBR) at 8.75% during its meeting on August 11, 2026.
The decision, announced by MPC Chairman and CBK Governor Dr. Kamau Thugge, reflects the Committee's assessment that the current policy stance remains adequate to keep inflation expectations anchored and the shilling stable.
Kenya's Inflation and Economic Growth
Kenya's overall inflation edged up marginally to 6.5% in July 2026 from 6.4% in June but remained within the government's target band.
Core inflation was virtually unchanged at 3.2% in July compared to 3.1% the previous month, while non-core inflation eased slightly to 15.0% from 15.1%, partly reflecting government interventions such as fuel subsidies and a temporary VAT reduction on petroleum products.
Food inflation, however, remained a concern, driven by higher prices for vegetables, including Irish potatoes, tomatoes, kale, cabbages, and onions.
On the growth front, Kenya's economy expanded by 5.3% in the first quarter of 2026, accelerating from 4.9% recorded in the same period of 2025.
The MPC projected full-year growth of 4.9% in 2026 and 5.3% in 2027, up from 4.6% in 2025, underpinned by a robust industrial sector, resilient services activity, and steady agricultural output.
Banking Sector and External Position
The MPC noted continued improvement in the quality of bank assets. The ratio of gross non-performing loans to total loans fell to 14.6% in July 2026, down from 15.4% in April 2026 and 17.6% in August 2025, with declines recorded across manufacturing, construction, trade, agriculture, and real estate.
Private sector credit growth remained firm at 10.2% in July, a sharp turnaround from a contraction of 2.9% in January 2025. Average commercial bank lending rates dropped to 14.3% in July from a high of 17.2% in November 2024.
On the external side, Kenya's current account deficit widened to an estimated 3.0% of GDP in the twelve months to June 2026, compared with 1.9% in the same period a year earlier, as goods imports rose 13.1% while diaspora remittances declined 2.4%.
The CBK's foreign exchange reserves stood at USD 15,249 million, equivalent to 6.3 months of import cover, providing a cushion against external shocks.
The Committee flagged the ongoing conflict in the Middle East as the primary risk to both the global and domestic outlook, with global growth projected to moderate to 3.0% in 2026 from 3.5% in 2025, and global inflation forecast to rise to 4.7% from 4.1% over the same period.
The MPC said it would continue monitoring global oil prices and their potential second-round effects on domestic inflation ahead of its next scheduled meeting in October 2026.
Source: TUKO.co.ke
Reporting originally appeared via TUKO. Read the full source for additional context.