CBK Maintains Lending Rate at 8.75 Per Cent Amid Pressure From Banks

CBK Maintains Lending Rate at 8.75 Per Cent Amid Pressure From Banks

NAIROBI, Kenya — The Central Bank of Kenya (CBK) has maintained its benchmark lending rate at 8.75 per cent, signaling confidence in the country’s current monetary policy stance despite mounting pressure from commercial banks and growing inflationary concerns.

The decision, announced following the Monetary Policy Committee (MPC) meeting held on June 9, is expected to provide some relief to borrowers, businesses, and investors who had been closely monitoring the regulator’s next move amid rising fuel prices and increasing pressure on household budgets.

By retaining the Central Bank Rate (CBR), policymakers have opted for stability at a time when both global and domestic economic conditions remain uncertain.

In a statement issued after the meeting, CBK said the current monetary policy framework remains appropriate and continues to support economic recovery while keeping inflation under control.

“The Monetary Policy Committee (MPC) decided to maintain the Central Bank Rate (CBR) at 8.75 percent during its meeting held on June 9, 2026,” the Central Bank stated.

According to the committee, one of the key factors influencing the decision was the persistence of global economic risks, particularly those linked to the ongoing conflict in the Middle East.

The bank noted that geopolitical tensions have disrupted international supply chains, increased transportation costs, and pushed up global energy prices, creating inflationary pressures across many economies.

“The conflict in the Middle East has disrupted global supply chains and led to a sharp increase in energy prices and transportation costs, resulting in higher inflation and moderated global growth prospects,” CBK explained.

The decision comes as Kenya experiences a notable rise in inflation.

Latest data from the Kenya National Bureau of Statistics shows that overall inflation climbed to 6.7 per cent in May 2026, up from 5.6 per cent in April, largely driven by higher fuel, electricity, and cooking gas costs.

The increase has had a direct impact on household spending, with many consumers facing higher transportation and food expenses.

Particularly concerning for policymakers has been the sharp rise in non-core inflation, which tracks volatile items such as food and energy.

According to CBK, non-core inflation surged to 16.0 per cent in May, compared to 13.4 per cent in April, reflecting rising prices of essential commodities consumed by millions of households.

The higher costs of vegetables, fuel, and other basic necessities have placed additional strain on families already grappling with an elevated cost of living.

Despite these challenges, CBK noted that government interventions have helped cushion consumers from even sharper price increases.

Among the measures cited were fuel subsidies and the temporary reduction of Value Added Tax (VAT) on fuel from 16 per cent to 8 per cent, policies that the committee believes have contributed to maintaining price stability.

The banking sector has also shown signs of recovery.

CBK reported that private sector credit growth rose to 9.3 per cent in May 2026, a significant improvement compared to the negative 2.9 per cent recorded in January 2025.

The increase suggests that commercial banks are lending more to businesses and individuals, helping stimulate economic activity across key sectors.

At the same time, average lending rates have gradually declined, falling from 17.2 per cent in November 2024 to 14.5 per cent in May 2026.

The reduction has provided some breathing space for borrowers in sectors such as agriculture, construction, manufacturing, and trade.

Looking ahead, the Central Bank projects Kenya’s economy will expand by 4.9 per cent in 2026, slightly lower than the earlier forecast of 5.3 per cent.

The revision reflects concerns over global uncertainty, slower international trade, and rising costs affecting both the agricultural and services sectors.

The MPC’s decision comes against a backdrop of calls from sections of the banking industry for a rate increase.

Some financial sector stakeholders have argued that raising the benchmark rate would help contain inflation and prevent further price increases from becoming entrenched in the economy.

They contend that inflation at 6.7 per cent has already increased pressure on households and could undermine purchasing power if left unchecked.

However, CBK appears to have struck a balance between supporting economic growth and containing inflation, choosing stability over aggressive monetary tightening.

For borrowers and businesses, the decision means loan pricing is likely to remain relatively stable in the short term, while consumers continue to watch closely for signs that inflationary pressures may begin to ease in the coming months.

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CBK Maintains Lending Rate at 8.75 Per Cent Amid Pressure From Banks