The Kenya Bankers Association (KBA) has called upon the Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) to retain the current benchmark rate of 10.50%. The KBA emphasized that although inflation has eased and fallen within the Central Bank’s target range, concerns about high inflation expectations persist due to new taxes introduced in the Finance Act of 2023.
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The KBA lobby further highlighted the destabilised economic growth momentum of Kenya as soaring input prices and persistently high interest rates have led to decreased production and consumer demand. As a result, banks have become more cautious, reducing lending to riskier segments of the private sector and favouring safer options such as government securities. Additionally, the ongoing Russia-Ukraine conflict has tightened global financial conditions, exacerbating pressure on the Kenyan Shilling against other major currencies due to a widening current account deficit.
The KBA stressed that the current monetary policy stance should be maintained to strike a balance between driving down inflation and safeguarding economic activity. This decision is driven by the need to allow the effects of the policy signal implemented in late June 2023 to permeate the economy. The next MPC meeting is scheduled for August 9, 2023.
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Awaiting announcement of new Central Bank Rate (CBK) in the next MPC meeting to be held on 9th August 2023, forecasts suggest that the MPC will likely maintain the benchmark rate at 10.5 per cent, taking into account the repercussions of the previous rate hike and prevailing macroeconomic factors. AIB-AXYS Africa echoed this sentiment, mentioning the influence of lower July inflation figures on the committee’s considerations.
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