The Central Bank of Kenya (CBK) has projected that inflation will remain steady at 5.25 percent through 2026, signaling confidence in the country’s macroeconomic stability despite ongoing global uncertainty.
Thank you for reading this post, don't forget to subscribe!In its latest Monetary Policy Committee (MPC) report, the CBK attributed the outlook to stable food and fuel prices, a resilient Kenyan shilling, and improving agricultural output. “The economy has remained resilient, with recovery in the industrial sector and consistent growth in agriculture during the second quarter of 2025,” the report noted.
CBK cuts rate to spur credit growth
In a move aimed at stimulating investment, the MPC announced a 25 basis-point reduction in the Central Bank Rate (CBR), lowering it from 9.50 percent to 9.25 percent. The bank said the decision is intended to encourage lending and boost access to credit for households and small businesses.
“The reduction in the policy rate is expected to influence commercial banks to adjust their lending rates, supporting access to credit for households and businesses,” the statement read.
The committee expects this measure to cushion Kenya’s economy as it transitions into 2026, promoting growth in the private sector and maintaining confidence in the financial markets.
Fuel and food prices help contain inflation
Ahead of the upcoming review by the Energy and Petroleum Regulatory Authority (EPRA), the MPC observed that global oil prices have eased, driven by increased OPEC output and declining global demand.
However, the report cautioned that geopolitical tensions in the Middle East and the ongoing war in Ukraine could disrupt the current balance and push prices upward.
On the domestic front, food prices have remained relatively stable, with adequate global supplies keeping cereals and wheat prices moderate. Sugar prices have also steadied, supported by high production in Brazil and favorable harvests in India and Pakistan.
Diaspora remittances and growth outlook strong
The CBK noted that diaspora remittances continue to grow steadily, buoyed by diversification of source countries and policies promoting skilled labour exports.
Kenya’s Gross Domestic Product (GDP) is forecast to expand by 5.2 percent in 2025 and 5.5 percent in 2026, driven by robust investment and strong agricultural performance.
“With inflation contained and growth prospects improving, the CBK is confident that the economy remains on a stable trajectory despite external pressures,” the MPC concluded.
