CBK Holds Rate at 8.75%: Policymakers Keep Borrowing Costs Steady as Inflation Ticks UpCBK Holds Rate at 8.75%: Policymakers Keep Borrowing Costs Steady as Inflation Ticks Up

The decision matters to every borrower and saver in the country because the Central Bank Rate anchors what banks charge for loans and pay on deposits. A held rate means pricing signals from the regulator will not change before the committee meets again in December.

In its press release for the meeting, the Monetary Policy Committee (MPC) said the current stance "remains appropriate to ensure that inflation expectations remain anchored within the target range." The rate was unchanged from the previous meeting.

Inflation inches up, with core prices leading

Overall inflation rose to 6.8% in September from 6.6% in August, which the CBK says is still within the target range. The bank expects inflation to stay inside that range in the near term.

The detail beneath the headline is more mixed. Core inflation, which strips out volatile items and is a guide to underlying demand, rose to 4.0% from 3.4%. Non-core inflation, which captures food and energy, eased to 14.0% from 14.7%.

The committee pointed to government interventions, including fuel VAT cuts and subsidies, and a stable exchange rate as support for its inflation outlook. It said it will keep watching global oil prices and second-round effects on inflation, and that it is prepared to act further if needed.

Growth forecast nudged higher

The CBK now projects the economy will grow by 5.0% in 2026, up from an earlier 4.9%. It left its 2027 projection at 5.3%. Growth in 2025 was 4.6%.

Foreign exchange reserves stood at about KSh 1.91T ($14.70B), equivalent to 5.9 months of import cover, according to the same release. The exchange rate was described as stable, though the release gives no specific figure.

What it means for borrowers and savers

Commercial lenders have been slow to pass on policy changes. As Mwenendo earlier reported, bank loans cost an average 14.34% in August against an average deposit rate of 6.91%, a gap the held policy rate does little to narrow in the near term.

Short-term government paper tells a similar story. As Mwenendo earlier reported, Treasury bill demand surged with yields slipping, consistent with a policy rate that is not moving. Mwenendo has also explained how interbank rates track the Central Bank Rate.

The rise in core inflation is the figure to follow. If it keeps climbing while food and fuel prices ease, the MPC may find it harder to justify a steady rate at its December meeting. For now, households and businesses should expect loan pricing to stay close to current levels.