Global Economic Headwinds

The Reserve Bank of Australia (RBA) held its key interest rate steady at 3.6% on Tuesday, 4th November 2025, a move that signals persistent global inflationary pressures and offers a cautionary perspective for emerging economies like Kenya. The decision, which was widely anticipated by economists, came after a surprise acceleration in inflation, forcing the central bank to pause the monetary easing cycle it had pursued for most of the year.

In its official statement, the RBA's monetary policy board highlighted that core inflation reached 3% in September, touching the upper limit of its target band for the first time since 2022. The bank also released updated forecasts, projecting that underlying inflation will climb to 3.2% by mid-2026, with the headline rate expected to hit 3.7%. This uptick has effectively pushed back expectations for any further rate cuts until at least 2026, according to major bank predictions.

A Mirror to Kenya's Challenges

While geographically distant, Australia's economic situation presents a relevant case study for Kenya. The Central Bank of Kenya (CBK), which has been in its own easing cycle, lowered its benchmark rate to 9.25% at its last meeting on 7th October 2025, to support economic activity. However, like Australia, Kenya is grappling with specific inflationary drivers that affect the daily lives of its citizens.

According to the Kenya National Bureau of Statistics (KNBS), the official inflation rate for October 2025 was a relatively stable 4.6%. However, this figure masks significant price pressures in essential sectors. Year-on-year food and non-alcoholic beverage inflation was recorded at a high 8.0%, with staples like tomatoes and sugar seeing price jumps of 37.3% and 22.6% respectively over the past year. This mirrors the RBA's concerns, where rising housing and utility costs are key factors behind persistent inflation.

Diverging Housing Markets, Shared Pressures

A key driver of the RBA's cautious stance is a resilient housing market, where prices and rents are forecast to continue rising. Kenya's property market, while operating under different dynamics, also shows signs of intense pressure. Recent data from real estate consultancy HassConsult indicates that while the overall rental market has seen some contraction, the sales market for detached homes is surging. In the third quarter of 2025, suburbs like Runda and Muthaiga saw annual sales price growth of 15.3% and 13.9% respectively. This growth, largely driven by cash buyers, highlights a demand for housing as a store of value amid economic uncertainty, a trend that can sustain price pressures irrespective of central bank policies.

Global Outlook and Local Implications

The RBA's decision aligns with a broader global trend of central banks remaining vigilant in the face of stubborn inflation. International financial institutions like the IMF and World Bank have noted that while headline inflation is declining globally, core inflation is proving stickier, complicating monetary policy. The IMF's October 2025 World Economic Outlook projects global growth will slow to 3.2% in 2025, with persistent uncertainty and financial vulnerabilities posing significant risks.

For Kenya, the Australian experience serves as a crucial reminder that the path of monetary policy is not always linear. While the CBK's rate cuts aim to stimulate a domestic economy projected to grow by 5.2% in 2025, external shocks and persistent domestic inflation in key areas could force a re-evaluation. The RBA's firm stance, holding rates steady despite having cut them three times earlier in the year, underscores that central banks globally remain prepared to prioritise price stability, even if it means delaying anticipated relief for borrowers. This global "higher-for-longer" interest rate environment has direct implications for Kenya's borrowing costs and the overall stability of its economy.