Kenya’s monetary policy stance has shifted significantly over the past two years, reflecting changing inflation dynamics, exchange-rate pressures, and evolving global risks. The Central Bank Rate (CBR) reached 13.0% in June 2024 after the Central Bank of Kenya (CBK) tightened policy aggressively to contain inflationary pressures and support a weakening shilling. At the time, tighter monetary conditions were intended to stabilise prices, anchor inflation expectations, and restore confidence in the foreign exchange market.
As inflation moderated and exchange-rate conditions improved, the CBK gradually shifted toward monetary easing. Between August 2024 and February 2026, the Monetary Policy Committee (MPC) implemented a series of rate cuts that cumulatively reduced the benchmark rate by 4.25% points to 8.75%. By January 2026, headline inflation had eased to 4.4%, below the midpoint of the CBK’s target range of 5.0% ± 2.5%, creating room for a more accommodative policy stance. Lower rates were also expected to support private sector credit growth and broader economic activity following an extended period of tight financial conditions.
The April 2026 MPC meeting marked a pause in that easing cycle, with the Committee leaving the benchmark rate unchanged at 8.75%. The decision came against a backdrop of rising global oil prices linked to renewed conflict in the Middle East. International crude prices reportedly increased from about USD 63.8 per barrel in late 2025 to close to USD 100.0 per barrel by April 2026, contributing to higher domestic fuel costs. Petrol prices in Kenya rose to KSh 197.6 per litre, while headline inflation accelerated to 5.6% in April. Food prices also remained elevated, with non-core inflation rising sharply in preceding months.
External sector pressures also intensified. Higher import costs, combined with softer remittance inflows and weaker export earnings, contributed to a widening current account deficit estimated at around 3.0% of GDP. In its April communication, the MPC indicated that it would closely monitor potential second-round inflation effects before determining the future policy path.
Attention now turns to the June 9 MPC meeting. With inflation already above the 5.0% midpoint target and risks from global energy markets still elevated, market expectations have shifted toward the possibility of a policy tightening move. (Start your investment journey today with the cytonn MMF, call+2540709101200 or email sales@cytonn.com)
