Kenyan Shilling Gains Marginally Against U.S. Dollar as CBK Projects Inflation to Hit 6.2% by July

Kenyan Shilling Gains Marginally Against U.S. Dollar as CBK Projects Inflation to Hit 6.2% by July

The Kenyan shilling posted a modest gain against the U.S. dollar this week, offering a sign of resilience in the face of global economic headwinds, even as the Central Bank of Kenya (CBK) warned of rising inflationary pressures driven by escalating global oil prices.

According to the CBK’s latest weekly bulletin, the shilling traded at 129.53 units against the U.S. dollar on April 9, strengthening slightly from 129.99 recorded on April 2. While the appreciation was marginal, it reflects a degree of stability that policymakers have worked to maintain amid ongoing volatility in global commodity markets.

The central bank attributed the currency’s steady performance to a combination of factors, including sustained foreign exchange inflows, improved investor confidence, and strong reserve buffers.

“The stability of the shilling is supported by diversified foreign exchange inflows, increased confidence in the economy and adequate foreign exchange reserves,” CBK noted.

Kenya’s foreign exchange reserves stood at approximately USD 13.3 billion as of April 9, equivalent to about 5.7 months of import cover. This remains comfortably above the statutory minimum requirement of four months, providing a crucial buffer against external shocks.

However, that cushion is increasingly under pressure due to surging global oil prices linked to tensions in the Middle East. Analysts point to disruptions in key shipping routes, particularly around the Strait of Hormuz, as a major factor constraining supply and pushing prices higher.

Murban crude oil rose to USD 90.33 per barrel on April 9, up from USD 89.45 a week earlier and significantly higher than the USD 60.6 per barrel recorded in late 2025. The increase is expected to have a direct impact on fuel prices in Kenya, with consumers bracing for potential increases at the pump in the coming pricing cycle.

The CBK’s Monetary Policy Committee (MPC), which met on April 8, flagged the rising cost of oil as a key risk to the country’s inflation outlook.

“International oil prices have risen sharply and remained volatile due to supply disruptions and elevated uncertainties attributed to the war in the Middle East,” the committee stated.

The central bank now projects that inflation could rise to 6.2 per cent by July 2026, marking the highest level in recent years, though still within its target range of 5±2.5 per cent. Without the oil price shock, CBK estimates that inflation would have remained within a more stable band of between 4.5 and 5.0 per cent over the same period.

Kenya’s headline inflation stood at 4.4 per cent in March 2026, up slightly from 4.3 per cent in February, indicating relatively stable price levels so far. The CBK maintains that inflation will remain largely contained in the near term, supported by favourable weather conditions expected to stabilise food prices and a broadly stable exchange rate.

“Inflation is expected to remain anchored, supported by appropriate monetary policy actions and expected stability in food prices,” the MPC added.

Despite this outlook, the central bank cautioned that risks remain, particularly if rising fuel costs trigger broader price increases across sectors such as transport, manufacturing, and food distribution.

“There is a need to monitor any second-round effects of the recent increase in international oil prices on overall inflation,” the committee warned.

Economists say that while the shilling’s stability offers some reassurance, sustained pressure from global energy markets could test both monetary policy and consumer resilience in the months ahead.

As the country awaits the next fuel pricing review, attention will remain on how policymakers balance inflation control with economic growth, amid an increasingly uncertain global environment.

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Kenyan Shilling Gains Marginally Against U.S. Dollar as CBK Projects Inflation to Hit 6.2% by July