Kenya has maintained its benchmark lending rate at 8.75 percent, signaling confidence in the country’s current economic stability while remaining cautious about global risks that could disrupt progress. The decision by the Monetary Policy Committee (MPC) reflects a balanced approach aimed at keeping inflation within target while supporting economic growth across key sectors.
Policymakers noted that the current monetary policy stance is appropriate to anchor inflation expectations and sustain exchange rate stability. Inflation has remained relatively controlled, allowing the Central Bank to hold rates steady. However, there is growing concern about potential pressure from rising international oil prices, largely linked to ongoing geopolitical tensions in the Middle East. These developments could have indirect effects on the cost of living if they persist.
Global uncertainties continue to play a significant role in shaping Kenya’s economic outlook. Prolonged conflict in the Middle East and evolving trade policies across major economies present risks that could affect inflation, trade flows, and overall economic performance. While earlier surveys had indicated expectations of stable or declining inflation, more recent findings suggest that some stakeholders now anticipate upward pressure due to increasing global oil prices.
Despite these concerns, there is sustained optimism within the business community. Surveys conducted among CEOs and market participants show confidence in economic growth prospects over the next year. This optimism is largely driven by a stable macroeconomic environment characterized by low inflation, a steady exchange rate, and declining interest rates. Additional support comes from favorable weather conditions expected to boost agricultural production, ongoing infrastructure investments and increased digital innovation within the private sector.
At the same time, some challenges remain. Businesses have raised concerns about high operating costs, global economic uncertainties and relatively low consumer demand. These factors could slow down economic expansion if not addressed effectively.
Kenya’s external position has shown some changes, with the current account deficit widening to 2.4 percent of GDP in the 12 months to February 2026, compared to 1.3 percent in a similar period the previous year. This shift is mainly due to a higher trade deficit and reduced inflows from secondary income. Imports have increased significantly, particularly in intermediate and capital goods, reflecting ongoing investment and economic activity. Exports have also grown, supported by strong performance in sectors such as horticulture, tea, coffee, and livestock.
Looking ahead, the current account deficit is projected to rise further to 3.0 percent of GDP in 2026, influenced by global risks including higher oil prices, slower growth in remittances and reduced earnings from services. Nevertheless, Kenya’s foreign exchange reserves remain strong, providing more than five months of import cover and offering a buffer against short-term external shocks.
The banking sector continues to demonstrate resilience, supported by strong liquidity and adequate capital levels. Although the ratio of non-performing loans has increased slightly to 15.6 percent, financial institutions have maintained sufficient provisions to manage potential risks. The rise in non-performing loans has been observed across several sectors, including agriculture, trade, manufacturing and household lending.
Encouragingly, credit growth to the private sector has improved, reaching 8.1 percent in March 2026. This growth reflects increased demand for loans, particularly in construction, agriculture, trade, and consumer goods. The trend suggests that businesses and individuals are gradually gaining confidence in borrowing and investing.
Lending rates have also been on a downward trend, with average commercial bank rates falling to 14.7 percent in March 2026. This decline is partly attributed to improved transmission of monetary policy, supported by the full implementation of the Risk-Based Credit Pricing Model. The model aims to enhance transparency in loan pricing and ensure that borrowers are charged fairly based on their risk profile, making credit more accessible and inclusive.
The Monetary Policy Committee has emphasized that it will continue to closely monitor both domestic and international developments. Particular attention will be given to the evolution of inflation and the potential impact of global events, especially fluctuations in oil prices and geopolitical tensions. The committee has indicated its readiness to take further action if necessary to maintain economic stability.
The next MPC meeting is scheduled for June 2026, where policymakers will reassess the economic environment and determine whether any adjustments to the current policy stance are required.
Overall, the decision to hold interest rates steady reflects a cautious but optimistic outlook for Kenya’s economy. With inflation under control, a stable financial sector and improving access to credit, the country is positioned for steady growth. At the same time, ongoing global uncertainties highlight the importance of remaining vigilant and adaptable in navigating future economic challenges.
Author: Moureen Koech
Moureen Koech is a passionate Digital Journalist, an adept Agribusiness Writer with a keen eye for news and an impactful story-teller,whose stories provide key value to Agripreneurs and stakeholders in the Agricultural sector
