The Kenya Bankers Association (KBA) has called on the Central Bank of Kenya (CBK) to maintain the benchmark policy rate at 8.75 %, citing growing global uncertainties and emerging risks to inflation and exchange rate stability.
In its latest Research Note, released ahead of the Monetary Policy Committee (MPC) meeting, the KBA Center for Research on Financial Markets and Policy states that while inflation remains within the CBK’s target range, external pressures are mounting and could reverse recent gains.
Kenya’s Inflation Risks Persist Despite Stability
According to KBA, Kenya’s inflation rose to 4.4% in March, remaining within the CBK’s preferred band of 2.5 to 7.5%.
The increase in inflation was largely driven by higher food and transport costs, reflecting underlying pressures in key economic sectors.
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KBA cited rising global oil prices as a key risk factor, warning that sustained increases could lead to higher domestic fuel and transport costs, which would likely feed into consumer prices.
The ongoing geopolitical conflicts in the Gulf region and Eastern Europe continue to disrupt global supply chains and trade routes, adding further uncertainty to price stability.
Core inflation, which excludes volatile food and energy prices, has remained relatively subdued.
The association warns that external shocks could quickly spill into the economy, especially Kenya’s reliance on imports for fuel and industrial inputs.
Slowing Economic Momentum and Credit Constraints
According to KBA, Kenya’s economic recovery, while still on track, is beginning to show signs of slowing momentum.
Private sector activity, the report added, has softened slightly, reflecting cautious business sentiment amid global uncertainties and domestic financial constraints.
On February 10, 2026, the Monetary Policy Committee lowered the Central Bank Rate by 25 basis points to 8.75 % from 9.0%.
The reductions helped lower short-term interest rates, providing some relief to borrowers and supporting lending activity.
“Recent cuts in the Central Bank Rate have helped ease short-term interest rates and support lending. However, structural challenges in the financial system mean these benefits are taking time to fully reach businesses and households,” the statement read.
Private sector credit growth has shown modest improvement but remains below optimal levels.
Commercial banks continue to adopt a cautious lending approach due to elevated credit risks and the persistence of non-performing loans (NPL), leading to tighter lending conditions, particularly for small and medium-sized enterprises, which are critical drivers of economic activity and employment.
KBA also emphasized that while monetary policy easing has provided some support, additional structural reforms may be necessary to enhance credit access and stimulate stronger economic growth.
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Exchange Rate Pressures and External Vulnerabilities
The Kenyan shilling is facing increasing pressure, according to the KBA, largely due to external imbalances.
A widening trade deficit, driven by faster growth in imports than in exports, is increasing demand for foreign currency and exerting downward pressure on the local currency.
At the same time, the Research Note highlights potential risks to diaspora remittances, a key source of foreign exchange for Kenya.
The Association argues that maintaining the current policy rate would provide stability while allowing policymakers to monitor evolving risks in both the domestic and global economic environment.
