The Central Bank of Kenya (CBK) has projected that the cost of living in the country will gradually decline over the next year, supported by stable consumer prices and a steady Kenyan shilling. According to the bank, inflation is expected to remain low and within the target range over the next 12 months.
In its latest outlook published on December 13, 2025, the CBK said inflation could fall to as low as 3.7% by June 2026. This is lower than its earlier forecast of 4.3%. Data from the Kenya National Bureau of Statistics (KNBS) shows that inflation already eased from 4.6% in October to 4.5% in November 2025, signaling improving price stability.
The shilling has also remained stable against the US dollar, trading at an average of 129.16 in the last week. The stable exchange rate has helped reduce pressure on import costs, which supports lower inflation.
However, CBK noted that food and fuel prices may rise slightly in the next three months, mainly due to high vegetable prices. This increase is expected to be temporary, as prices should start falling once the heavy rainy season begins around April 2026.
CBK Governor Kamau Thugge said that inflation is expected to stay below the midpoint of the bank’s target range and will not exceed 5% up to November 2026. He added that the low inflation outlook gives the bank room to further lower interest rates if needed, to support increased lending to the private sector and boost economic growth.
The CBK’s inflation target range is between 2.5% and 7.5%. Earlier in August 2025, the bank had projected that inflation could peak at 5.2% in March 2026, but the latest data has shown a more positive trend.
The bank also explained that core inflation, which excludes food and fuel prices and makes up about 81% of total inflation, is expected to remain stable. This will help slow down any sharp increases in consumer prices.
On economic performance, KNBS reported that Kenya’s economy grew by 5% in the second quarter of 2025, an improvement of 0.4% compared to the same period in 2024. The industrial sector grew by 4%, while the services sector expanded by 5.7%, slightly lower than last year’s 6.1%. Strong growth was recorded in banking, insurance, transport, communication, technology, and wholesale and retail trade.
Overall, the CBK’s outlook suggests improving economic stability, a lower cost of living, and better conditions for businesses and households in the coming year.
