The Kenya Bankers Association (KBA) has called on the Central Bank to lower its base lending rate amidst easing inflationary pressure.
In a research note titled; Economic Fundamentals Support a Stronger Policy Rate Cut published on October 3, the bankers noted that inflation remains on a declining trend and below the midpoint of the target range, with food and fuel prices continuing to drop as well.
The bankers also noted the volume of loans to advanced private sector businesses remains low which the Association attributed to high interest rates and elevated non-performing loans, which it pointed out threatens to slow economic growth.
The bankers’ umbrella body also raised concern over global economic uncertainty which they claimed was on the rise mainly driven by geo-economic fragmentation, impacting investments and market volatility.
CBK Governor Kamau Thugge speaking at the Africa Climate Business Forum on November 2, 2023
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CBK
The Central Bank was also urged to emulate other Central Banks in global and advanced markets which have already started initiating monetary policy easing streaks with the view to enhance economic growth.
KBA also noted that the Kenyan Shilling has been on an incredible trajectory against major currencies globally for the last nine months strengthening since February this year.
The latest call by the Kenya Bankers Association comes just days before the Monetary Policy Meeting which has been scheduled for October 8.
During the meeting, the Central Bank is expected to announce a new base lending rate which commercial banks use as a benchmark to set interest rates for loans.
The last MPC meeting held by the Central Bank was in August this year during which the regulator marginally lowered its base rate by 0.5 per cent from 13 per cent.
CBK in its announcement revealed that its previous measures had lowered overall inflation to below the mid-point of the target range, stabilized the exchange rate, and checked inflation.
“The Committee further noted that NFNF inflation has moderated, while central banks in some major economies have lowered interest rates in response to easing inflationary pressures, with an indication that other central banks will soon embark on a similar trajectory,” read part of the statement by CBK.
At the time, the monetary policy regulator hinted at a period of stability with the expectation being that interventions would be made in future if need be.
A photo depicting a person holding Kenya Shilling notes and US Dollar notes
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Janta Kenya
