CBK holds rate at 9 June meeting as inflation rises to 6.7%

The Central Bank of Kenya's Monetary Policy Committee held the Central Bank Rate at 8.75% at its meeting on 9 June 2026. This is the second consecutive hold after 10 straight cuts that had brought the rate down from 13.0%. 

The 10 consecutive cuts are the longest easing cycle in the CBK's history, signaling a clear effort to reduce lending rates, promote private-sector credit, and foster economic growth following a period of restrictive monetary policy. 

The decision to hold rates again can be linked to the rise in inflation in May 2026. Kenya's headline inflation rose to 6.7%, the highest rate since January 2024. Fuel and transport costs caused by the conflict in the Middle East have shifted the inflation rate toward the higher end of Kenya's inflation target. 

The MPC choosing to hold again suggests that Kenya is treating the inflation spike as temporary. The authorities appear to view the spike as oil-driven rather than a structural shift requiring an immediate policy reversal. 

“Overall inflation is expected to remain within the target range in the near term, assuming a de-escalation of the conflict in the Middle East,” said Kamau Thugge.

Why did the Central Bank of Kenya rate cuts pause again in June?

Before the MPC decided to hold rate cuts in April, Kenya's annual inflation rate was at 4.4% in March 2026, slightly up from 4.3% in February, but still well below the 5% midpoint of the CBK's official target band of 5% ± 2.5 percentage points. 

In June, these inflation figures, alongside other rates, have gone up even higher. Here is what has changed: 

• Inflation: 6.7% 
• Core inflation: 3.2% 
• Non-core inflation: 16.0%
• Transport costs rose 16.5% 
• Fuel prices: 8.4% between April and May alone
• Foreign reserves: 13,240 million USD (5.6 months of import cover) as of June 11

Factors outside Kenya, such as the Middle East conflict, have disrupted global supply chains and pushed up energy and transport costs. Other central banks in major economies have also maintained cautious stances, keeping rates steady as they monitor the fallout of the conflict.  

“Having considered these developments, including the potentially transitory nature of the conflict, the Committee concluded that the current monetary policy stance, with the Central Bank Rate unchanged at 8.75%, remains appropriate to ensure that inflation expectations remain anchored within the target range and the exchange rate remains stable,” said CBK Governor. 

What has changed since April?

Since the last CBK MPC meeting in April, Kenya's inflation has remained within the CBK's target range. 

Foreign exchange reserves have also remained above the statutory minimum of four months. This could give the CBK room to absorb external shocks, helping to limit sharp moves in the shilling. 

The Kenyan shilling has remained steady, trading around 129 KSh per USD for an extended period, supported by CBK interventions and stable capital inflows.

The Kenya Shilling was stable against the major and regional currencies this week, trading at 129.48 KSh to the US dollar on 11 June, versus 129.37 KSh on 4 June.

The factors that have guided the CBK easing cycle remain: inflation has remained low; credit growth is still growing, and currency remains stable. However, the Russia-Ukraine war and trade policy uncertainty remain sources of disturbance in world supply chains. 

Tracking DXY alongside local reserve data can help traders separate Kenya-specific currency stability from broader dollar-market moves.

What this means for forex traders

Interest rate decisions have an effect on the currency market dynamics, and Kenya’s interest rate decision for June 2026 has clear implications for traders watching the shilling. 

The hold at 8.75% maintains Kenya's yield position, but offers no new carry incentive. That means there may be no changes in the rate differentials that carry flows in and out of the shilling. 

If the hold continues, the shilling is likely to remain range-bound around current levels in the near term, especially if stable reserves continue to support it. 

Now that the MPC has reached its June decision, what matters is the decision at the August meeting. The outcome of the CBK MPC meeting remains tied to the inflation data, which may show whether 6.7% was a peak or the beginning of a trend.

If June and July CPI data show inflation moving back toward the 5% midpoint, the CBK may choose to resume its easing cycle before year-end. If the inflation rate holds above 6%, the MPC faces a difficult choice at the August CBK MPC meeting. 

Conclusion

The June hold suggests the MPC is betting that the inflation spike is transitory and oil-driven. The bank is now operating in a more balanced economic picture in the face of stable domestic inflation, recovering credit growth, and new global energy market volatility. 

What inflation pressures and global financial conditions look like in the weeks ahead may determine a hold or continuation of the Central Bank of Kenya's rate cuts in August.  

Holding rates may suggest ongoing caution about oil prices and geopolitical risks, while a resumption of easing could indicate confidence in Kenya's inflation trajectory and economic recovery process. 

For forex traders, Kenya’s interest rate decision in June 2026 will likely influence sentiment across regional currencies. The next two months of data will determine whether the hold was justified or whether 9 June was the last opportunity to get ahead of the curve. 

For more on Kenya's monetary policy outlook and the Iran war's impact on Kenya’s economy, visit Exness Insights. Traders can also test strategies for volatile rate environments using the Exness Demo Account.