Kenya’s overall inflation edged up to 6.5 per cent in July 2026, from 6.4 per cent in June, driven by higher transport costs and rising prices of processed food products, including wheat and cooking oil.
According to the latest economic update, the increase was largely attributed to a rise in core inflation, which climbed to 3.2 per cent in July from 3.1 per cent the previous month. Core inflation excludes volatile food and energy prices and is considered a key indicator of underlying price pressures in the economy.
The report noted that transport costs and processed food prices continued to exert upward pressure on household budgets, reflecting persistent cost increases across essential consumer goods.
However, there was some relief as non-core inflation eased slightly to 15.0 per cent in July from 15.1 percent in June, indicating a modest slowdown in price increases for volatile items such as fresh food and fuel.
Despite the marginal rise in inflation, the Kenya Shilling remained stable against major international and regional currencies. The local currency traded at KSh129.40 against the US dollar on July 30, compared to KSh129.53 on July 23, reflecting continued stability in the foreign exchange market.
The country’s foreign exchange reserves also remained strong at US$15.4 billion, equivalent to 6.4 months of import cover, well above the Central Bank of Kenya’s statutory minimum requirement of four months.
The money market remained liquid during the week ending July 30, supported by active open market operations. Commercial banks held excess reserves averaging KSh13.5 billion above the required Cash Reserve Ratio, while the Kenya Shilling Overnight Interbank Average Rate (KESONIA) remained unchanged at 8.75 per cent.
In the government securities market, the Treasury bill auction held on July 30 attracted bids worth KSh27.4 billion against an advertised KSh28 billion, representing a 97.7 per cent subscription rate. Interest rates on the 91-day Treasury bill increased marginally, while yields on the 364-day Treasury bill declined.
The Nairobi Securities Exchange recorded positive performance during the week, with the Nairobi All Share Index (NASI) rising 1.7 per cent, while the NSE 25 and NSE 20 indices gained 1.44 per cent and 1.97 per cent, respectively. Market capitalisation also increased, although both trading volumes and equity turnover declined.
The bond market posted stronger activity, with turnover in the domestic secondary market increasing by 38.2 per cent. Kenya’s Eurobond yields also declined, signalling improved investor confidence in the country’s sovereign debt.
Globally, major central banks, including the US Federal Reserve, the Bank of England, and the Bank of Japan, maintained their policy rates amid persistent economic uncertainty. The US economy expanded by an annualised 1.5 per cent in the second quarter of 2026, while the euro area recorded 1.0 per cent growth during the same period.
Meanwhile, global commodity markets recorded mixed performance. Murban crude oil prices fell sharply to US$78.24 per barrel from US$86.05, driven by increased oil exports through the Strait of Hormuz and higher production by OPEC+. In contrast, spot gold prices rose to US$4,102.40 per ounce, reflecting continued demand for safe-haven assets amid global economic uncertainty.
The modest rise in Kenya’s inflation suggests that while underlying price pressures remain contained, increasing transport and processed food costs continue to weigh on the cost of living, underscoring the need for sustained efforts to keep inflation within the Central Bank’s target range.
