Kenya Holds Interest Rate at 8.75 Percent as Middle East Conflict Fuels Inflation Risks

June 10, 2026

Mintesinot Nigussie

Kenya’s central bank kept its benchmark lending rate unchanged at 8.75 percent on Monday, citing rising global oil prices, renewed inflationary pressures and uncertainty linked to the conflict in the Middle East.

The Monetary Policy Committee said inflation climbed to 6.7 percent in May from 5.6 percent a month earlier, driven largely by higher fuel and gas prices following supply chain disruptions and increased transportation costs tied to the regional conflict.

Core inflation also edged up to 3.2 percent from 2.8 percent, while non-core inflation accelerated sharply to 16.0 percent from 13.4 percent, reflecting increases in energy and vegetable prices, particularly tomatoes and cabbages.

Despite the pickup in inflation, the Central Bank of Kenya said price growth is expected to remain within its target band of 5 percent, plus or minus 2.5 percentage points, assuming tensions in the Middle East ease in the near term.

The bank said government fuel subsidies, temporary reductions in value-added tax on fuel, stable exchange rates and favourable weather conditions supporting food production are expected to help contain inflationary pressures.

The committee also pointed to mounting risks to global growth, noting that the Middle East conflict had disrupted global supply chains and pushed up energy and transportation costs.

Kenya’s economy expanded by 4.6 percent in 2025, slightly below the 4.7 percent growth recorded a year earlier, as slower activity in agriculture and services offset a recovery in the industrial sector driven by construction.

The central bank revised down its 2026 growth forecast to 4.9 percent from an earlier projection of 5.3 percent, citing elevated uncertainty linked to the Middle East conflict and global trade tensions.