Kenya’s Monetary Policy Committee gathers this week, with the meeting set for Wednesday, October 7, 2026, and policymakers must decide whether to leave the Central Bank Rate at 8.75 percent or raise it.
The rate has been steady for some time. The August 11 decision was the third consecutive hold, following ten straight cuts totaling 425 basis points between August 2024 and February 2026. By that count, another hold this week would be the fourth in a row rather than the third. At that August meeting, the bank cited continued uncertainty over the war in the Middle East as the main reason for waiting.
The Kenya Bankers Association has formally recommended keeping the rate unchanged, pointing to stabilizing macroeconomic fundamentals and warning that further tightening could stifle private sector credit growth. The argument has weight because higher borrowing costs would land just as lending to businesses is beginning to recover.
The inflation data, however, point the other way. Annual inflation rose to 6.8 percent in September from 6.6 percent in August, its highest level since January 2024. That is the third monthly increase. The reading was driven by food inflation of 9.5 percent and transport inflation of 15.6 percent.
What may matter more to the committee is the breadth of the pressure. Core inflation, which excludes more volatile price movements, rose to 4 percent in September from 3.4 percent in August. The central bank has said the overall rise was largely driven by core inflation, mainly higher prices of processed food such as milk and wheat products, while non-core inflation eased to 14 percent from 14.7 percent. In other words, the pressure is no longer confined to fuel and other volatile items.
There is a counterweight. Headline inflation remains inside the central bank’s 2.5 to 7.5 percent target band. Governor Kamau Thugge expects it to stay within that range in the near term. Still, September’s figure came in above the committee’s own projection of 6.5 percent.
The committee will have to balance containing rising prices against protecting a credit recovery that is still fragile. Wednesday’s decision will show which of the two it considers the bigger risk.
