Kenya Interest Rate

Central Bank holds fire in April

Bank halts its near two-year long policy easing cycle: At its meeting on 8 April, the Central Bank of Kenya (CBK) paused its loosening cycle, leaving its central bank rate (CBR) at 8.75% as expected by economists. The hold followed 10 consecutive rate cuts totaling 425 basis points since August 2024, including a 25 basis point reduction in February this year.

War in Iran fuels price pressures and leads to 2026 GDP growth projection downgrade: The Bank favored a hold instead of another cut largely due to the uncertainty triggered by the war in the Middle East, which has disrupted supply chains and pushed up energy prices. Regarding price pressures, the Bank noted that headline inflation in March came in below the midpoint of its 2.5–7.5% target band, while core inflation remained stable, below the lower bound of the band. However, the CBK noted that it expects upward price pressure from higher energy costs, and the hold will help contain overall inflation within target in the near term. Turning to economic activity, the Bank noted that high-frequency indicators point to a continued resilient performance in Q1 2026 following an estimated 5.0% expansion in 2025. That said, the GDP growth outlook deteriorated: The CBK reduced its 2026 GDP growth projection to 5.3% from 5.5% following the outbreak of the war in the Middle East.

Our Consensus is for one additional cut in 2026: The Central Bank did not provide explicit forward guidance but rather suggested a wait-and-see approach regarding future interest rate changes. The majority of our panelists expect further cuts this year, while the rest see the Bank standing pat through the end of 2026; accordingly, our Consensus is for around 25 basis points of additional cuts this year. The CBK will reconvene in June.

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Kenyan interest rate projections for the next ten years from a panel of 6 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Kenyan interest rate.

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