The Central Bank of Kenya has raised its 2026 economic growth forecast to 5%, up from an earlier projection of 4.9%, citing stronger industry and services activity. The economy grew 4.6% in 2025, and the bank expects growth of 5.3% in 2027.

Governor Kamau Thugge said the upgrade rested mainly on stronger industry and services output. The bank projects services to expand by 5.6% and industry by 5.2% in 2026, with agriculture, the third growth driver, expected to grow by 3%.

The revised projection was presented a day after the Monetary Policy Committee held the benchmark interest rate at 7.5%, leaving borrowing costs unchanged as the bank weighs inflation risks.

Those risks remain visible in the latest price data. Overall inflation rose to 6.8% in September from 6.6% in August, while core inflation climbed from 3.4% to 4% over the same period.

Thugge attributed most of the September increase to milk prices, which rose above 8% for the month. Without that movement, he said, headline inflation would have been closer to 6.5%.

He noted that high energy costs continue to feed into food inflation, though government measures including subsidies and a reduction of Value Added Tax on fuel have helped ease the pressure.

The CBK expects overall inflation to peak at 7.2% in December 2026 before easing to the midpoint of its target range, 5%, by May 2027.

The bank’s inflation path and the MPC’s next rate decisions will show whether the projected December 2026 peak holds as forecast.