CBK explains why Kenyan households face higher costs amid deepening Middle East crisis

The Central Bank of Kenya (CBK) has warned that Kenyan households might face higher living costs due to the ongoing conflict in the Middle East, which could lead to elevated global energy and food prices. The CBK maintained the Central Bank Rate (CBR) at 8.75 percent, citing potential global growth moderation due to increased energy prices stemming from the Middle East crisis, alongside ongoing trade policy uncertainty and the Russia-Ukraine war.

Global inflation is anticipated to rise in 2026 primarily because of higher energy and food costs. In Kenya, this could exacerbate inflationary pressures, as the nation relies heavily on imported petroleum products. The CBK anticipates that global inflation will increase in 2026 primarily due to higher energy and food prices. While core inflation, which excludes volatile items, rose to 4.0 percent from 3.4 percent, non-core inflation eased to 14.0 percent from 14.7 percent, indicating non-domestic factors also contribute to inflation.

The CBK highlighted that government interventions, such as subsidies and reduced VAT on fuel, are helping to alleviate some of the pressure on households. Despite the rising inflation, the CBK expects it to stay within the target range due to monetary policy measures and a stable exchange rate. The central bank has decided to keep the CBR unchanged at 8.75 percent, as inflation is currently within the target range and monetary conditions do not necessitate further adjustments.

The CBK will continue to monitor global oil prices and their potential impacts on inflation, keeping itself prepared to take further action if needed.