Bankers Advise CBK to Hold Policy Rate Amid Economic Uncertainty
The Kenya Bankers Association (KBA) has urged the Central Bank of Kenya (CBK) to keep the benchmark policy rate at 8.75 per cent ahead of the Monetary Policy Committee (MPC) meeting set for April 8, 2026. The call comes amid rising global risks and pressures on inflation and the Kenyan shilling.
In a statement released on April 7, the KBA’s Centre for Research on Financial Markets and Policy highlighted that maintaining the current rate would help the country navigate ongoing economic challenges.
The research note emphasized that while Kenya’s economic recovery is continuing, the pace is slowing, especially in private sector activity, which is being affected by geopolitical tensions in the Middle East and Ukraine.
According to the note, headline inflation in March rose slightly to 4.4 per cent, mainly due to higher food and transport costs, whereas core inflation—which excludes volatile items—remained low.
This suggests that while price pressures are emerging in specific areas, the overall economy is not experiencing runaway inflation.
The KBA pointed out that the MPC had previously reduced the Central Bank Rate (CBR) by 25 basis points on February 10, 2026, lowering it from 9.0 per cent to 8.75 per cent.
This marked the tenth consecutive reduction, aimed at boosting credit in the private sector and supporting economic growth.
Following the rate cut, commercial banks reduced lending rates, offering relief to borrowers, although structural weaknesses in the financial system have slowed the full benefits of lower rates from reaching households and businesses.
While private sector credit growth has shown improvement, the KBA warned it remains fragile. Banks are reportedly cautious, given heightened lending risks and continued high levels of non-performing loans, which limit the flow of affordable credit to businesses and consumers.
The research also highlighted mounting pressure on the Kenyan shilling, influenced by a growing trade deficit and possible disruptions in diaspora remittances, particularly from the Middle East. Imports are rising faster than exports, adding strain to the currency.
On Tuesday, April 7, the shilling weakened slightly to Ksh130 against the US dollar, after remaining around Ksh129 for much of the past year.
Global commodity prices have also contributed to economic concerns. Murban crude oil, for instance, surged from USD63 (Ksh8,198) per barrel in December 2025 to nearly USD98 (Ksh12,753) per barrel by late March 2026, reflecting ongoing supply chain disruptions.
Such increases are expected to push domestic costs higher, creating inflationary pressures that could affect both price stability and the exchange rate.
The KBA research emphasized that the current monetary environment faces risks from a widening current account deficit and potential disruptions to remittances caused by prolonged geopolitical conflicts.
It recommended that the MPC keep the policy rate at 8.75 per cent, arguing that this approach would help balance the need for economic recovery, control inflation, and stabilize the currency amid global uncertainty.
In conclusion, the bankers advised that sustaining the current monetary policy stance is the most prudent move at this time.
Holding the rate steady is expected to support the ongoing recovery, protect borrowers from higher costs, and maintain overall financial stability, even as the economy navigates external shocks and domestic vulnerabilities.
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