CBK forecasts stable inflation at 5.25% to close the economic cycle
By Mabonga Makhanu, October 13, 2025The Central Bank Monetary Policy Committee (MPC) report now projects the country’s inflation to remain at 5.25 per cent until the end of the current economic cycle.
The MPC report further stated that overall inflation will stay below the midpoint of 5.25 per cent. This has been supported by the stable prices of basic commodities and the continued stability of the exchange rate.
The committee has also forecasted a decline in the global inflation rate in 2026, attributed to lower fuel prices and reduced global demand. The stability is further linked to the resilience of the Kenyan economy in the second quarter of 2025, supported by recovery in the industrial sector and steady growth in agriculture.
The Gross Domestic Product (GDP) is projected to increase by 5.2 per cent in 2025 and 5.5 per cent in 2026, assuming continued investment and resilience in the agricultural sector.
Decline in banking rates
In the same report, the MPC decided to lower the CBK rate by 25 basis points to 9.25 per cent from 9.50 per cent, a move that will likely influence commercial banks to reduce their lending rates as the country moves into 2026.
Ahead of the fuel price review by EPRA, the committee also established that global oil prices have moderated due to increased production by OPEC countries.
They noted that the current stability in oil prices is supported by higher tariffs and improved supply but warned that ongoing tensions in the Middle East and the war in Ukraine could disrupt this balance and cause prices to rise.
The report further indicated that the prices of foodstuffs such as cereals and wheat have remained moderate, contributing to overall inflation stability. This is due to ample global supplies and subdued import demand. A similar trend has been observed in sugar prices, supported by high production in Brazil and favourable harvest prospects in India and Pakistan.
Additionally, diaspora remittances have continued to rise despite global uncertainties. This growth has been driven by diversified source countries and the direct impact of government policies aimed at exporting skilled labour.