The Kenya Bankers Association (KBA) has formally requested that the Central Bank of Kenya maintain the Central Bank Rate (CBR) at 8.75% when the Monetary Policy Committee meets on 7 October. This request comes as inflation edges toward the upper limit of its target range. The KBA's Centre for Research on Financial Markets and Policy argues that keeping the rate unchanged would support the ongoing recovery in private-sector credit and sustain broader economic activity.
Headline inflation in Kenya rose from 4.3% in February to 6.8% in September, moving close to the top of the 2.5%-7.5% target band. This increase is largely driven by food and transport cost pressures. Despite the price uptick, the KBA notes that demand pressures remain limited. The association projects that inflation could ease as harvests improve food supply in major agricultural regions.
The KBA points to strong real GDP growth—5.3% in Q1 2026 versus 4.9% a year earlier—as a justification for maintaining the current monetary stance. This growth indicates a recovering economy, and the association believes that tightening policy could threaten this recovery. Factors such as higher fuel and food prices, rising production costs, weaker global growth, and the anticipated El Niño rains could all negatively impact the economy if policy were tightened.
The association also highlights several factors that are helping to cushion the economy against imported inflation. These include exchange-rate stability, favourable interest-rate differentials, and falling Treasury bill yields. These conditions suggest that the current monetary policy stance is having a stabilizing effect on the economy.
The request to maintain the CBR at 8.75% follows the Monetary Policy Committee's decision in August to keep the rate unchanged. At the time, the committee said it was intended to anchor inflation expectations amid global uncertainties and higher oil prices. The KBA's request is aimed at ensuring that this stability is maintained.
The Central Bank of Kenya's decision on the CBR will be closely watched by economists and investors. A change in the rate could have significant implications for the economy, including the cost of borrowing and the attractiveness of investments. The KBA's request suggests that the association believes the current rate is appropriate for the current economic conditions.
The Kenya Bankers Association's request to the Central Bank of Kenya reflects the association's goal of supporting economic recovery and stability. The association's emphasis on maintaining the current monetary stance highlights its concern about the potential risks of tightening policy. The Central Bank of Kenya will consider the KBA's request when making its decision on 7 October.
Key points
- The Kenya Bankers Association requests that the Central Bank of Kenya maintain the Central Bank Rate at 8.75%.
- Inflation in Kenya has risen to 6.8% in September, driven by food and transport cost pressures.
- The KBA cites strong real GDP growth and limited demand pressures as reasons to maintain the current monetary stance.
