The Central Bank of Kenya (CBK) has kept its base rate unchanged at 8.75 percent, pausing the run of cuts in the previous 10 monetary policy committee meetings as it monitors the effect of the Iran war on the country's inflation.
The April rate setting meeting took place against the backdrop of the Iran conflict that has caused a spike in oil prices and clouded the prospects of global economic growth. The war has also disrupted Kenya’s exports to the Gulf region, including tea, coffee and meat products.
In its statement, the CBK noted that central banks in the major economies have also kept their policy rates unchanged as they assess the impact of the conflict on their inflation and growth outlooks.
For Kenya, the rise in the price of oil prices presents the biggest risk for its inflation outlook, given the wide impact of transport costs on the cost of goods and services in the economy.
Kenya’s next price review on April 14 is therefore expected to reflect the higher prices of the commodity based on the March 2026 shipments.
“Having considered these developments, the Committee therefore concluded that the current monetary policy stance, with the Central Bank Rate (CBR) unchanged at 8.75 percent, remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable,” said the CBK.
“Additionally, the MPC assessed that there is need to monitor any second-round effects of the recent increase in international oil prices on overall inflation.”
Besides raising costs for motorists, a surge in pump prices in Kenya would have a wide impact on household budgets due to the pass-through effect of transport charges on the prices of basic goods, and higher electricity prices due to the thermal power component on monthly bills.
Oil prices jumped by between 50 and 60 percent last month due to the conflict that pits the US and Israel against Iran. The price of UAE Murban Oil (which informs Kenya’s pump pricing) touching a high of $118 a barrel from $70 on February 27, and Brent Oil going up to $150 from $72 a barrel.
The benchmark prices however declined to $96.81 a barrel for Murban and $94.60 for Brent on Wednesday after US President Donald Trump announced a two-week ceasefire with Iran, which will allow for wider negotiations on ending the month-long war.
While expressing the concerns about energy prices, the CBK said that inflation should remain within its preferred range of five percent plus or minus 2.5 percentage points in the near term, supported by stable food price and a stable shilling.
“Despite expected upward pressure from higher energy prices, overall inflation is expected to remain within the target range in the near term, supported by appropriate monetary policy actions, expected stability in food prices attributed to favourable weather conditions, and a broadly stable exchange rate,” said the apex bank.
The bank however said that the Middle East conflict will affect Kenya’s economic growth projection for this year, which it has revised downwards to 5.3 percent from the earlier projection of 5.5 percent made in its last meeting in February.
In the February 10 meeting, the monetary policy committee's main consideration in making the 10th straight CBR cut was to stimulate lending by banks to the private sector, and therefore support economic activity and growth.
The 0.25 percentage points rate cut was made against the backdrop of a prolonged stability of the exchange rate at the Sh129 level, and falling inflation that was expected to remain anchored due to the onset of the rainy season. However, this outlook has now been clouded by the events in the Middle East.
Growth in commercial banks’ lending to the private sector stood at 8.1 percent in March 2026 compared to 7.4 percent in February, and -2.9 percent in January 2025. Average lending rates stood at 14.7 percent in March, down from 14.8 percent in February.
Banks however continued to struggle with asset quality, where the ratio of gross non-performing loans to gross loans climbed to 15.6 percent in March from 15.4 percent in December 2025.
