Inflation Pressures Raise Expectations of CBK Interest Rate Increase

Rising inflation pressures are increasing expectations that the Central Bank of Kenya (CBK) could raise its benchmark lending rate on June 9 for the first time since February 2024.

Kenyan banks say growing pressure from fuel prices and consumer costs, linked to global energy shocks from the Iran war, is pushing conditions toward a possible increase in the Central Bank Rate (CBR).

According to the Kenya Bankers Association, indicators across the economy are showing signs of higher inflation, with April inflation rising to 5.6 percent from 4.4 percent — the fastest increase recorded in seven years.

The expectation comes after CBK paused its rate-cutting cycle last month and maintained the benchmark rate at 8.75 percent following 10 consecutive cuts. The regulator said it wanted to assess the wider impact of rising global energy prices before making further decisions.

A rate increase could quickly affect borrowing costs across the economy because 27 of Kenya’s 37 banks currently use the CBR as the reference point for setting loan prices under the revised risk-based pricing model.

The anticipated shift comes at a time when lending conditions had started improving. Lending rates eased slightly to 14.7 percent in March from 14.8 percent in February 2026, while private sector credit growth improved to 8.1 percent from 7.4 percent.

Even so, pressure remains in the banking sector, with gross non-performing loans rising to 15.6 percent in March from 15.4 percent in December 2025, adding to concerns over the cost of credit if inflation continues to rise.