Kenya’s central bank paused its cycle of rate cuts on Wednesday, maintaining its benchmark lending rate at 8.75% to monitor the second-round effects of a surge in global energy prices triggered by the conflict in Iran.
The decision followed 10 consecutive rate cuts and was in line with forecasts from a Reuters poll of economists.
The bank’s last rate decision was made in mid-February, more than two weeks before the US and Israel launched strikes on Iran, prompting retaliatory action from Tehran.
“The Committee… concluded that the current monetary policy stance… remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable,” the Central Bank of Kenya said in a statement.
“The MPC (Monetary Policy Committee) assessed that there is a need to monitor any second-round effects of the recent increase in international oil prices on overall inflation.”
Annual inflation stood at 4.4% in March, slightly higher than February’s 4.3% reading and within the government’s preferred 2.5%-7.5% band.
The central bank lowered its growth forecast for this year to 5.3% from a previous projection of 5.5%, citing the Middle East conflict as a risk to key sectors of East Africa’s largest economy.
It now forecasts a current account deficit of 3.0% of gross domestic product in 2026, higher than a previous projection of 2.2%, also due to the conflict in Iran.
Global oil prices fell on Wednesday after US President Donald Trump said he had agreed to a two-week ceasefire with Iran, but they remain significantly higher than before the conflict began.
Analysts expect global oil prices to retain a substantial geopolitical premium for the foreseeable future.
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