The Kenya Bankers Association (KBA) has urged the Central Bank of Kenya (CBK) to retain its benchmark interest rate, the Central Bank Rate (CBR), at 9.50% during its upcoming meeting on 29th May 2023. KBA’s position is based on the view that the current monetary policy stance is appropriate given the current economic conditions.
In a research note released, the banking industry umbrella body argues that the CBR should be retained in order to support economic growth. KBA noted that the Kenyan economy is still recovering from the COVID-19 pandemic and that higher interest rates could dampen economic activity while noting that the current inflation rate is still within the CBK’s target range of 2.5%-7.5%.
KBA argues that raising the benchmark interest rate would not be effective in taming inflation in the short term. The association noted that the current inflation is being driven by factors such as the war in Ukraine and the rising cost of food and fuel. These factors are beyond the control of the regulator.
KBA’s research note highlighted that higher interest rates are already having a negative impact on businesses and consumers.
“We believe that the current monetary policy stance is appropriate given the current economic conditions. Raising the CBR would not be effective in taming inflation in the short term and would have a negative impact on businesses and consumers. We urge the CBK to retain the CBR at 9.50% in order to support economic growth.” – Kenya Bankers Association.