by Timothy Cerullo on Tuesday, 23 June 2026 – 11:40 am The Central Bank of Kenya office and an insert of the IMF building. Photo The Trading Room/CBK The International Monetary Fund (IMF) has directed the Central Bank of Kenya (CBK) to adopt a new economic model that also includes government spending and climate-related risks to determine interest rates. The recommendation follows the completion of an assessment of the Central Bank’s Quarterly Projection Model (QPM) used in monetary policy decisions to determine base lending rates. According to the lender, the new model will greatly improve the regulator’s ability to accurately forecast inflation, economic growth, exchange rates and climate-related risks compared to the previous version. “We reviewed the model’s historical fit, assessing how well past economic shocks are captured. The evaluation shows that the performance of the new model is far superior to that of the old model,” the IMF disclosed. Kenya’s Treasury officials with the IMF Managing Director Kristalina Georgieva (centre) during the spring meeting held in the United States on Monday, April 13, 2026. Photo The National Treasury The recommended changes come as Kenya faces economic uncertainty driven by extreme weather events , fiscal pressures, and continuously changing global trade policies. The Bretton Woods Institution noted that the updated model will help the CBK make more informed monetary policy decisions and improve its ability to keep inflation close to its 5 per cent target. Under climate-related shocks, the IMF stated that droughts and poor rainfall can significantly increase food prices, pushing up overall inflation and potentially forcing the CBK to hike interest rates. The IMF’s new model also places greater emphasis on the government’s spending, unlike previous central bank versions that focused largely on budget deficits. The revised model directly measures how government expenditure affects demand, inflation, and economic activity, providing policymakers with a clearer picture of the country’s fiscal status. It further introduced new tools to separately track food and energy inflation, allowing for more detailed analysis of the factors driving changes in the cost of living. The IMF officials believe these r ecommendations will improve the quality of economic forecasts and streamline monetary policy decisions in future Monetary Policy Committee Meetings. The IMF recommended that the CBK immediately begin using the new model in monetary policy decisions and continue refining it as more economic data becomes available. The latest move is expected to have a direct impact on commercial bank lending rates because changes in the central bank rate typically influence the cost of borrowing for Kenyans. Kenyans lining up inside a local bank. Photo Latest News CS Ruku Issues Orders to All Govt Agencies, Warns Civil Servants Tue, 23 Jun 2026 – 12:24 pm NTSA Explains Why Some Vehicle Owners Cannot Download eLogbooks Tue, 23 Jun 2026 – 12:11 pm Five Kenyan Women Nominated for Global Award Tue, 23 Jun 2026 – 11:51 am IMF Issues Fresh Instructions to CBK Affecting Bank Interest Rates Tue, 23 Jun 2026 – 11:40 am Sifuna Responds After ODM SG Ouster, Reveals Next Move Tue, 23 Jun 2026 – 11:22 am Ruto Directs Immediate Salary Increase for All Civil Servants Tue, 23 Jun 2026 – 11:10 am Confusion for FKF as Procurement Body Issues Verdict on CHAN Scandal Tue, 23 Jun 2026 – 10:59 am New Report Flags SGR, Affordable Housing Projects Over Corruption Tue, 23 Jun 2026 – 10:47 am Interior Ministry to Link CCTVs With National ID Database in New Plan Tue, 23 Jun 2026 – 10:36 am Motorists Stranded for Hours as Massive Gridlock Hits Nairobi-Mombasa Highway Tue, 23 Jun 2026 – 10:13 am Kenya Issues 7-Day Ultimatum to Shipping Companies Tue, 23 Jun 2026 – 9:57 am DCI Arrests Nairobi MCA, Retrieves Illegal Gun Tue, 23 Jun 2026 – 9:32 am Load More