The Central Bank of Kenya (CBK) has held its benchmark interest rate at 8.75 per cent, pausing a nearly two-year easing cycle as it monitors rising global risks linked to tensions in the Middle East.
CBK Governor Kamau Thugge announced the decision after the Monetary Policy Committee (MPC) meeting on Wednesday, citing the need to assess the economic impact of the ongoing Iran conflict.
The move is also aimed at keeping inflation within the bank’s target range of 2.5 per cent to 7.5 per cent while maintaining exchange rate stability.
Headline inflation edged up slightly to 4.4 per cent in March from 4.3 per cent in February but remains within the target band. The MPC, however, warned that rising global energy prices driven by geopolitical tensions could increase inflationary pressure in the coming months.
Despite these risks, the CBK expects inflation to remain stable in the near term, supported by favourable weather conditions, steady food prices, and a relatively stable currency.
Thugge noted that the Middle East crisis has disrupted global supply chains, pushing up energy costs and heightening uncertainty in the global economy. He added that many central banks worldwide are also holding rates steady as they assess the long-term implications for inflation and growth.
The decision follows a series of 10 consecutive rate cuts since August 2024, totaling 425 basis points. While inflation remains moderate, the central bank is adopting a cautious stance amid emerging global risks.
Kenya’s economic outlook has been slightly revised, with growth now projected at 5.3 per cent, down from 5.5 per cent. The current account deficit is also expected to widen to 3% of GDP due to higher oil import costs, weaker exports, and declining remittances.
The Kenyan shilling recently crossed the 130 mark against the US dollar for the first time since November, though it has only weakened marginally this year. Meanwhile, foreign exchange reserves stood at $13.7 billion in early April, enough to cover nearly six months of imports.
Across Africa, other central banks are also holding rates steady, reflecting a wait-and-see approach as global uncertainties, particularly around energy prices and capital flows, continue to shape monetary policy decisions.
