Kenya: Central Bank leaves rates unchanged in June
Bank extends hold: At its meeting on 9 June, the Central Bank of Kenya (CBK) decided to maintain its policy rate at 8.75%. This marks the second consecutive hold after 10 straight cuts totaling 425 basis points since August 2024.
Geopolitical uncertainty underpins decision: The Bank favored a hold largely due to the uncertainty triggered by the war in the Middle East. Regarding price pressures, the CBK noted that while headline inflation increased considerably in May compared to April, it remained within the 2.5–7.5% target band. This, coupled with the Bank’s expectation that average inflation will remain within the target range, made a rate hike unnecessary. On the flipside, a cut wasn’t warranted, as the economy continues to expand at a robust pace.
Panelists split on outlook: The Central Bank did not provide explicit forward guidance but hinted at a wait-and-see approach regarding future interest rate changes. Our panelists have turned more hawkish, with a small majority now expecting the CBK to hike the policy rate this year. The remainder expect the Bank to stand pat through the end of 2026. Consequently, our Consensus is for a slight increase in the policy rate this year. The CBK will reconvene in August.