Banks Urge The Central Bank Of Kenya To Maintain Stability In Planned Monetary Policy Decision

By Lavin Atieno

The Kenya Bankers Association (KBA), representing the banking industry’s interests, is advocating for stability in monetary policy ahead of the Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) meeting planned for February 2024.

In their latest analysis, the KBA highlights key factors influencing the monetary policy landscape, including easing inflationary pressures, rising market interest rates, and sustained credit growth within the banking sector. With the MPC set to announce its stance for the near to medium term, the KBA stresses the importance of considering these factors.

The KBA’s position favors maintaining the current monetary policy stance, specifically advocating for retaining the Central Bank Rate (CBR) at its current level. They argue that this approach will allow for the full transmission of previous adjustments and provide stability necessary for supporting ongoing economic activities.

In contrast to recent policy adjustments aimed at addressing exchange rate pressures and inflation expectations, the KBA believes that stability in the policy rate will help anchor inflation expectations and guide inflation towards the targeted range of 5.0 percent.

While recent policy measures, such as the significant hike in the CBR from 10.50 percent to 12.50 percent in December 2023, have contributed to positive developments such as declining overall inflation, concerns persist regarding global commodity prices and geopolitical conflicts disrupting supply channels.

The KBA emphasizes the importance of monitoring these external factors, as their impact could influence local inflation dynamics and overall economic stability. Additionally, the KBA underscores the significance of global policy actions in shaping commodity prices and inflation trends.

As stakeholders await the outcomes of the upcoming MPC meeting, the KBA’s call for stability in monetary policy highlights the banking sector’s commitment to supporting sustainable economic growth amidst evolving global and domestic challenges.