Kenyans with home loans and businesses seeking credit could be spared higher borrowing costs for the rest of the year after fresh market analysis indicated that the chances of the Central Bank of Kenya (CBK) increasing its benchmark interest rate are now almost non-existent.
According to NCBA's Weekly Fixed Income Report released on Monday, July 13, the country's inflation outlook has remained stable enough to keep pressure off the central bank, with the lender projecting inflation to stay within the 6 to 7 per cent range for the remainder of 2026.
The outlook suggests banks are unlikely to face fresh pressure to raise lending rates, offering some relief to households, businesses and investors who have closely monitored CBK's monetary policy decisions over the past year.
The report notes that although global markets continue to grapple with inflationary risks, Kenya's domestic conditions remain relatively stable, reducing the need for tighter monetary policy.
It argues that prevailing interest rates already reflect current market expectations, leaving little room for unexpected movements in the coming months.
NCBA further points to the government's more realistic fiscal planning as another factor supporting a stable interest rate environment, saying it has lowered the likelihood of shocks that could otherwise force the central bank to act.
The assessment comes even as geopolitical tensions continue to unsettle global markets. Renewed hostilities involving Iran and disruptions to global oil supplies have pushed international crude oil prices higher, raising concerns over imported inflation in many economies.
Even so, the report maintains that Kenya is unlikely to experience inflationary pressure severe enough to warrant a policy rate increase.
Recent Treasury bill auctions also reinforce the outlook. Over the past three weeks, yields on the 91-day, 182-day and 364-day Treasury bills have remained largely unchanged, signalling that investors expect monetary policy to remain steady.
The report also notes that despite strong demand for government securities, authorities declined expensive bids during the latest bond auction, opting instead to accept only a portion of the funds on offer.
NCBA expects the government's borrowing appetite to remain seasonally subdued during the third quarter, another factor likely to help keep interest rates stable.
The forecast comes at a time when central banks in several advanced economies are adopting a more cautious approach as inflation proves more persistent than previously anticipated.
Rising energy prices and continued uncertainty in global markets have prompted expectations that many major economies could keep interest rates elevated for longer.
For Kenya, however, the outlook appears more favourable. A stable interest rate environment could provide breathing room for businesses planning investments, households servicing loans and consumers seeking new credit, while also helping the government manage its borrowing costs without significantly higher debt servicing expenses.
Although external risks, particularly movements in global oil prices, remain a key concern, the latest assessment suggests Kenya's monetary policy is likely to remain unchanged unless there is a significant shift in inflation or other economic fundamentals.
