Kenya Holds Interest Rate as Global Oil Shocks Loom

Mintesinot Nigussie

Kenya’s Central Bank has kept its benchmark rate unchanged at 8.75 percent, signalling confidence in the country’s ability to weather rising global risks while sustaining domestic growth. The Monetary Policy Committee pointed to ongoing turbulence from the Middle East conflict, which has driven up global oil and fertiliser prices.

Kenya’s inflation held at 4.4 percent in March 2026, slightly higher than February’s 4.3 percent, but remained comfortably within the central bank’s target range of 2.5 to 7.5 percent. Core inflation held steady at 2.1 percent, underpinned by stable prices for processed foods.

The MPC noted that overall inflation is expected to remain within target in the near term, supported by favourable weather, a broadly stable exchange rate, and ongoing monetary measures. Kenya’s economy grew an estimated 5.0 percent in 2025, driven by a rebound in industry, resilience in services, and steady agricultural output.

The country’s current account deficit widened to 2.4 percent of GDP in the 12 months to February 2026. The central bank noted that foreign exchange reserves stand at USD 13.35 billion, providing a buffer equivalent to 5.68 months of import cover.

The banking sector remains resilient, with strong liquidity and capital positions. Lending to the private sector rose 8.1 percent in March 2026, supported by declining interest rates and the full implementation of a risk-based credit pricing model.

The MPC said it would monitor developments closely, including second-round effects from higher oil prices, and stands ready to adjust policy as necessary. Its next meeting is scheduled for June 2026.

Businesses and investors welcomed the decision to hold rates steady, viewing it as a sign of stability amid global uncertainty. The central bank’s cautious approach aims to balance growth support with inflation control in a volatile external environment.

Overall, Kenya’s decision to maintain its interest rate demonstrates confidence in the economy’s resilience while preparing for potential external shocks from rising global oil prices.