CBK: Kenya Inflation Set to Rise to 6.2% on Global Oil Shock

Kenya’s inflation outlook is under renewed pressure after the Central Bank of Kenya (CBK) warned that rising global oil prices could push consumer costs higher in the coming months.

CBK said the country’s price stability is now being affected by external shocks, especially developments in global energy markets.

“However, with the oil price shock and assuming that the conflict lasts for the next three months, our inflation forecast goes above the midpoint of 5 per cent, peaking at 6.2 per cent in July 2026 and then progressively declining to 5.7 per cent by March 2027,” CBK Governor Thugge said.

The projection comes at a time when fuel prices in Kenya have been highly volatile, with recent reviews showing sharp increases before a partial correction through tax adjustments.

In the latest pricing cycle, petrol rose by Ksh 28.69 per litre while diesel increased by Ksh 40.30, briefly pushing pump prices in Nairobi above the Ksh 200 mark.

This spike came despite earlier government efforts to cushion consumers through subsidies and other fiscal measures, showing how global oil movements continue to outweigh local interventions.

The government later moved to ease the pressure by lowering VAT on petroleum products from 13 per cent to 8 per cent. Following the adjustment, petrol prices dropped to Ksh 197.60 per litre, while diesel fell to Ksh 196.63. Kerosene remained unchanged at Ksh 152.78.

Still, the broader concern remains the direction of global oil markets. Kenya imports nearly all its petroleum products, leaving the economy exposed to international price swings.

The ongoing geopolitical tensions in the Middle East, particularly involving Iran, have disrupted supply chains and created uncertainty in key shipping routes such as the Strait of Hormuz.

Any instability in this corridor often leads to higher global oil prices, which then filter directly into local fuel costs.

For households and businesses, fuel remains one of the biggest drivers of inflation because it affects transport, electricity generation, and production costs across sectors.

The Central Bank has cautioned that if high fuel prices persist, they could lead to broader inflationary pressures beyond energy and transport.

To manage expectations, CBK has maintained its benchmark lending rate at 8.75 per cent, opting for stability as it monitors global developments.

While the bank still expects inflation to ease after peaking, the timing will depend heavily on whether global oil supply conditions stabilise in the coming months.

If tensions reduce, price pressures could soften. If not, Kenyans may continue facing elevated living costs well into next year.