Kenya Bankers Association (KBA) has urged the Monetary Policy Committee, a top policy making organ of the Central Bank of Kenya(CBK) to retain the benchmark rate at 10.50%. KBA said that although inflation rates have eased to within the CBK target range, inflation expectations remain high as a result of the new taxes contained in the Finance Act 2023.
The KBA lobby also says Kenya’s economic growth momentum remain fragile as input prices skyrocket and interest rates also remain high, all these slowing down production and consumer demand.
With recent increases in the policy rate, banks have also cut down on lending to the riskier private sector in favour of safer options, including Government paper.
KBA mention in its research notes that the war between Russia and Ukraine, has tightened condition in global financial markets as a widening current account deficit puts more pressure on the Kenya Shilling against other hard world currencies.
“The balance of risks between decisively driving down inflation levels and protecting some economic activity, and the need to allow transmission of the policy signal effected in late June 2023 to filter through, will require that the current monetary policy stance is maintained by keeping the CBR unchanged,” said KBA.
The next meeting of the Monetary Policy Committee (MPC) will be held on 09th August 2023.
We foresee the MPC maintaining the CBR rate at 10.50% with the committee considering the impact of the previous hike as well as the prevailing macro factors”, more so the lower July inflation figures,” said AIB-AXYS Africa.
ALSO READ: CBK Raises Key Benchmark Rate to 10.50%
