Central Bank holds for third meeting in a row in August

Third straight hold: At its meeting on 11 August, the Central Bank of Kenya (CBK) decided to maintain its policy rate at 8.75%. This marks the third consecutive hold after 10 straight cuts totaling 425 basis points from August 2024 to February 2026.

War uncertainty drives hold: The Bank favored a hold largely due to continued uncertainty related to the war in the Middle East. Regarding price pressures, the CBK noted that headline inflation rose to 6.5% in June, but remained within the 2.5–7.5% target band. The Bank expects inflation to remain within the target range in the near term, assuming a de-escalation of the Middle East conflict. Meanwhile, economic growth accelerated to 5.3% in the first quarter of 2026 from 4.0% in the previous quarter, reducing the case for a rate cut.

Our panel turns more hawkish: The Central Bank did not provide explicit forward guidance. Our panelists have turned more hawkish, with a small minority now expecting the CBK to hike the policy rate this year. The majority, however, still expect the Bank to stand pat through the end of 2026. The CBK will reconvene in October.

Panelist insight: Oxford Economics is one of our panelists expecting a hike by the end of 2026: “We have adjusted our Brent crude forecasts to reflect a much more gradual easing in prices throughout 2026, meaning we expect a weaker disinflationary impulse from domestic fuel price reprieve. In addition, it will become increasingly clear that food prices will rise significantly in late 2026 and early 2027. Accordingly, we still expect the central bank to tighten policy with a 50 bps increase in the interest rate in Q4 2026.” Conversely, Goldman Sachs sees the rate on hold through year-end. Ludovica Ambrosino notes: “As inflation remains above the mid-point of the target range, and given the pressure on the current account coming from oil price volatility, we expect the CBK to stay on hold until end-2026, restarting its cutting cycle in Q1 2027.”

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