CBK Warns Oil Shock Could Push Inflation to 6.2%

The Central Bank of Kenya has warned that inflation could rise to 6.2 percent in July 2026 if current global oil market pressures persist over the next three months. The bank projects that inflation would then ease gradually to 5.7 percent by March 2027.

According to the CBK, the revised outlook reflects rising global oil prices and the risk of sustained energy-driven cost pressures. Governor Kamau Thugge said the shift marks a departure from earlier expectations that inflation would remain closer to the 5 percent midpoint of the target range.

The warning follows recent fuel price increases after the Energy and Petroleum Regulatory Authority’s latest review. Reports indicated that petrol and diesel prices in Nairobi had risen to about Sh206.97 and Sh206.84 per litre respectively, before the government adjusted VAT measures to ease the impact.

The CBK notes that Kenya is being affected through the oil channel, with higher landed fuel costs and disruptions in global shipping routes contributing to a more uncertain supply environment. These factors are feeding into broader inflationary pressures within the economy.

While government interventions such as VAT cuts and subsidy measures are aimed at cushioning consumers, the bank indicates that these steps may only reduce the severity of the impact rather than eliminate it entirely. The inflation outlook is therefore being shaped not only by domestic monetary policy but also by external factors linked to global energy markets.

UThe situation highlights the growing influence of geopolitical developments and energy transit risks on Kenya’s economic conditions. In this context, the CBK’s position reflects a cautious approach, as it weighs the risks associated with rising inflation against the need for further monetary adjustments.