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In a research note, the Kenya Bankers Association (KBA) says it expects the CBK to maintain its hawkish policy stance as the effects of the recent hikes continue to flow through the economy
Bankers urged the Central Bank of Kenya (CBK) to maintain its benchmark rate steady at 13% during the next Monetary Policy Committee meeting on August 6th. The apex bank raised its Central Bank Rate (CBR) to 13.0 percent in February, at the peak of inflation and a highly depreciated shilling.
In a research note, the Kenya Bankers Association (KBA) expects the CBK to maintain its hawkish policy stance as the effects of the recent hikes continue to flow through the economy. The latest inflation data by the Kenya Bureau of Statistics (KNBS) indicates a further slowdown in inflation to 4.3 percent from 4.6 percent in June 2024.
Considering these developments, and the balance of risks, the KBA argued that maintaining the current monetary policy stance, keeping the CBR unchanged at 13.0 percent – would be appropriate. It also said that headline inflation remains stable within the lower target range driven by lower food and pump prices, favourable weather conditions, and the stronger currency.
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Further, the bankers note that economic growth remains resilient with a deceleration in private sector credit. Both short term and long-term market interest rates still hold high, all reflecting tighter conditions. Whilst the Kenyan shilling remains stable, emerging government financing risks pose headwinds to the exchange rate, hence the fallback in easing rates.
