Kenya's annual inflation rate climbed to 6.5% in July 2026, up from 6.4% in June, surpassing the central bank's target midpoint for the third month in a row. The nation's monetary policy committee had anticipated a rate of 6.7% for July. This increase places Kenya closer to the Central Bank of Kenya's upper inflation target limit of 7.5%, with the general price level being 6.5% higher compared to July 2025. The overall Consumer Price Index (CPI) increased from 154.91 in June 2026 to 155.20 in July 2026, resulting in a monthly inflation rate of 0.2%.
The surge in inflation was primarily driven by significant price increases in the Food and Non-Alcoholic Beverages category (9.0%), Transport (15.6%), and Housing, Water, Electricity, Gas and Other Fuels (3.2%) over the past year. These three divisions collectively constitute over 57% of the total weight across the 13 major expenditure categories. Specifically, the transport index, which increased by 15.6%, was a major contributor despite stable gasoline pump prices. The food and non-alcoholic index also saw a 9% rise. Core inflation, a key gauge of underlying price growth for the central bank, edged up to 3.2% in July from 3.1% in the preceding month, indicating secondary effects from higher fuel prices.
Inflation in Kenya, an oil importer, has been on an upward trajectory since the beginning of the US-Israeli conflict on Iran in February, which led to a surge in energy and fertilizer prices. Higher fertilizer costs have notably inflated Kenya's food index, which forms a substantial portion of the inflation basket. The country is also grappling with import delays that have disrupted commercial farming, with corn prices up to 21% above the five-year average in some areas. The nation faces an "elevated risk" of food insecurity due to corn-crop failures from poor rains in the northern Rift Valley. Additionally, a super El Niño event, expected around October, carries the risk of flooding, which could further damage crops and infrastructure.
Despite the rising inflation, the central bank is anticipated to maintain its benchmark interest rate at 8.75% when policymakers convene on August 11. This decision aims to stimulate private-sector lending and boost economic growth. The bank had previously held the rate steady for two consecutive meetings in June to assess the impact of the Middle East conflict on its forecasts. Falling diesel consumption suggests softer freight, industrial activity, and domestic demand, according to S&P Global Ratings, indicating that the energy shock is increasingly weighing on economic growth through demand destruction. Education services saw a 3.1% rise, while restaurants and accommodation services increased by 2.9%.
